Ole Hansen
Stay updated on what’s happening with oil, gold and other raw materials. Join Saxo Bank Head of Commodity Strategy Ole Hansen as he explores the world of commodities and how fundamentals, geopolitics and other factors could influence prices. He also looks at market opportunities for both traders and investors.
Article / 10 October 2016 at 2:29 GMT

Macro Monday: Waiting for the dust to settle

Global Macro Strategist / Saxo Bank Group - Singapore Hub
  • After last week's events, it's a little unclear what the markets are doing
  • Is it really a USD breakout or a development of a trend?
  • At best we should get one US rate hike this year

By Kay Van-Petersen

Welcome to Macro Monday, your cross-asset weekly call on global markets. For a replay of the call please click here.

For week 41 we take a look at the following:

  • Given the high impact week 40 – USD breaking out higher, leading to a lot of significant breaks and closes on technical levels: USDJPY, gold, silver, US 10-year, etc – it feels like we need the dust to settle to determine whether these markets are coming or going – i.e. Is this really a USD breakout and development of a trend? Or are we just in another iteration of the range-bound, two steps forwards, three steps back shuffle that we’ve been doing for most of 2016? I am not so sure. I do feeling strongly about two things:
  • One: I think at best we get one Federal Reserve hike this year – at best. I still think the Fed implied probability of 65% for December to be way too high. 
  • However, I think the more interesting thing is, that this could be the last hike we see from the US for a while. i.e. After postulating four hikes this year and potentially only delivering one, it seems to be that the market is mispricing the Fed’s ability to move next year. 
  • This may mean that the Fed’s next move, be it in 2017/18/19, may be to ease rather than hike.
  • The key risk to this view, is if inflation forces the Fed’s hand in the US. And this is the fine line it travels, on the one hand it knows it is far in the cycle (i.e. we are a lot closer to a recession than a boom economy) and on the other rates are not high enough where lowering them in the face of a recession helps the economy. And how do you lower rates if inflation is picking up while your economy is slowing down?
  • Two: I fail to see equities escaping velocity from higher government bond yields – they (EQ) cannot have the best of both worlds, i.e. rallying when yields compress to new lows and rallying when yields start to jump.

Clouded outlook. After last week's events it's a little unclear to see what's happening
in the markets. Photo: iStock

Thoughts on near-term tactical positioning

  • It feels that on the tactical side, we need to wait for the dust to settle – given not only the monster USD bull week, price shocks on sterling, but also the ongoing presidential elections and higher march up in yields. 
  • Tactically few things seem clear to me. Structurally, some capital should be put into gold and silver miners. Yes we are way oversold and the sentiment is poor – but we still have not seen a massive reduction in gold positioning (we’ve been long overdue for a healthy clean out and that’s what we are in the midst off now).
  • Higher moves up in G3 yields, leaves me wanting to have downside exposure in equities (i.e. remember the September 9 selloff, VIX up 40%, S&P down 2.5% ... came on the back of the G3 yields spiking post the September 8 European Central Bank meeting).
  • Often you have to sit on the side-lines until the noise clears up; this is one of the hardest things to do for traders/investors.

COT report highlights

  • FX: Continued increase USD bulls, up 7% in bets from up 12.4bn to up 13.3bn
  • Sterling new record shorts, +11% increase to +98k lots – positioning post Friday (October 7) will be very interesting
  • Big decrease in CHF shorts by 50% to down 3,000 lots. CAD shorts also increased by 21% to -14,000
  • The trend of additions to NZD shorts and Aussie longs continued
  • MXN and JPY unchanged, while euro saw slight increase in shorts by up 8% still well short of one-year lows
  • CMD: Big positioning changes, with energy the only space seeing bullish bets while others saw reductions/increase in bearish bets
  • WTI big week, up 40% to 254,000 lots, highest since May 15
  • Big positioning reductions to gold of -22%, -20% on platinum and -15% on silver. Palladium funnily enough saw a slight increase
  • Reversal in copper from shorts to longs, plus back to new record shorts in Wheat (CBOT)


  • Economy: CH: TB, CPI 1.3%p, PPI -0.8%p, New Loans US: JOLTS (12), Core TS, PPI, Cons. Conf. & Biz inv. JP: CA, Mach. Ord. EZ: GER ZEW, IP UK: Light AU: Bi-Annual Eco/Fiscal outlook, RBA report NZ: Light
  • Central banks: Fed mins (12), MXN Mins (13), BoK 1.25%e/p (13)
  • Fed speakers: Evans (11), Dudley (12), George (12)
  • Other: US presidential debate (Oct 9 – live now in Asia), US/JP/HK out on Monday (10)
Q4 key dates/events

  • Fed, ECB and BoJ: Fed November 2 and December 14, ECB Oct 20 and Dec 8, BoJ Nov 1 and Dec 20
  • US election dates: Oct 9,  second presidential debate, Oct 19 final presidential debate, Nov 8 US elections
  • Italian constitutional referendum finally set for Dec 4
  • European banking sector issues (timing?)

Technical picture
Edward Liu runs through all the technicals this week, with fewer charts yet a lot more detail for a different take.

  • S&P500: uptrend is consolidating within a symmetrical triangle. If it breaks down, we are targeting 2032. Long-term chart reveals a bull market seven years in the making, compared to the previous bull run which lasted five years. An October close below September’s closing would be technical confirmation of the rally correction.
  • Dax: Consolidating within a symmetrical triangle, possible trade view would be to short at current levels. TP: 10,200 , SL 10,600
  • DXY: Major down trend for DXY (Dollar Index) since Dec 2015, stochastics overbought and about to cross over, and closing below downward sloping trendline resistance on Friday
  • EURUSD: 200-day moving average remains good support, bullish bias if it closes above 1.1250 (trendline resistance)
  • AUDUSD: Having trouble breaking major trendline resistance on the weekly, maintain bearish bias unless weekly close above trendline resistance. However, Inverse H&S is in the making on the weekly charts. Two consecutive weekly closes above trendline resistance would turn bias to bullish.
  • USDCAD: Rising wedge, CCI overbought which has been a good leading indicator of previous declines.
  • USDJPY: Pierced Ichimoko clouds but currently trading back within the clouds. Stochastics bearish cross over in overbought territory, suggesting downside this week.
  • GBPUSD: Currently sitting on support at 1.2410, based on Fibo extension lines applied to 1.5 handle.
  • Gold: Broke down from symmetrical triangle, could go as low as 1226 based on price targets, hwoever, RSI and stochastic suggest correction to the upside
  • Crude oil: Dark cloud cover candlestick after a rally, stochastics overbought, CCI overbought, a lower close today on the dailies confirms upside is correcting
  • Wheat: Falling wedge suggests downside momentum is fading. MACD about to cross over to the upside. Possible trade view to go long at market targeting upper trendline, stop loss at lower trendline.

Here is this morning’s recording of this week’s Macro Monday Call.

– 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 again next Monday at: 0830 [SG/HK], 0930 [TOK], 1130 [SYD].


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail