Macro Monday Week 29: Yellen's clever plan on track — #SaxoStrats

• Commodities are making gains, with crude oil rising 5% last week
  
• US and Europe performed well while Asian stocks were mixed during the week
  
• The euro, GBP and AUD are all heading higher
• Hong Kong's Hang Seng is in the spotlight again this week
  

By Kay Van-Petersen

A  replay of the call is available here.

Summary of prior week

• Bank of Canada: Hawkish surprise after +25 basis point hike.
• Janet Yellen’s testimony to Congress was dovish.
• US Core CPI in line with expectations at 1.7% while headline misses
• There was more Trump noise with Donald Trump Jnr releasing emails about his interaction with the Russians during campaign trail. More bluster no substance.
• North Korea still a risk but nothing new news wise.
• FX: EURUSD going for 1.15
• Equities: US and Europe performed well while Asian stocks were mixed.
• Commodities: most made gains, with crude oil +up 5%, and gold and silver both heading higher.
  
• FI: US 10 tighter, Bunds see new recent highs.

COT Report

• Market Net short USD by $4.7bn
• Extreme positioning in JPY shorts, NZD and MXN longs.
• GBP positioning interesting as  shorts reduced close to 1 year high.
• No extremes in the energy contracts, net longs increased in WTI.
• Gold and silver now at one year lows in terms of positioning.
• Shorts still at 1 year lows for sugar, cotton, cocoa.
  

Week ahead and current thoughts

• Key Focus: ECB; UK Inflation, China Q2 GDP (already published; beat expectations at 6.9%); US Earnings continue.
• Central banks: RBA Minutes (due out on July 18), ECB -0.40% e/p (July 20), BI +4.75% e/p (July 20). BoJ 0.10% e/p (20)
• Fed Speakers: None
• Other: Japan market closed on Monday July 17.

Economic releases this week

• US: Empire, Housing, Leading
  
• China: RS, FAI, IP, 2Q GDP +6.8%e +6.9%p
  
• Eurozone: CPI +1.3% e/p CORE +1.1% e/p, ZEW survey
  
• Japan: TB, Activity Ind.
  
• UK: CPI 2.9% e/p CORE 2.6%e/p, PPI, RS
  
• Australia: Jobs Data +15,000 estimate; and unemployment rate 5.6%
  
• NZ: Q2 CPI 1.9%e 2.2%p Credit Spending
  

Positioning and sentiment

• Janet Yellen: Brilliantly done by being dovish last week while chugging along with the plan.  A weaker USD but with higher rates and lower 10 years is her strategy. At some point ahead, USD strength will reassert.
• North Korea: Sanctions are not going to do anything, watch for an increase in
• UK CPI: a 3% print (exp of 2.9%) would be a big deal.
• European Central Bank and Bank of Japan: All about the guidance. BoJ to be nonevent. But ECB could set stage for September 7, or Jackson Hole speeches.

Technical Picture: James Kim

• Dollar index: Dollar closed below the 95 level last week. However RSI does indicate that the selling could be running out of steam with divergence in the RSI.
• EURUSD: EURUSD bull run continues as it closed at its 2 year high and also broke the downtrend line from 2015 Q3.
• GBPUSD: Finally manage to break above the May’s high with retracement and retracement to the May’s high could be interesting to build longs at 1.3050.
• USDCAD : Continues to sink and closed 8% lower from its peak in May. May see USDCAD trade lower with supports coming in at 1.245 – 1.257.
• AUDUSD : Broke the 2 year high just like EURUSD with resistance now at 0.7915.
• EURJPY: 200 day moving average hindered EURJPY move higher last week.
• US10 Year: Saw technical rejection at the Fib50 retracement on Friday for US10 to move higher.
• USDJPY : Maintains bearish bias as USDJPY could see it move towards ¥111.64.
• S&PASX200: 200 day moving average proved once again to be a good support zone for the ASX but Friday’s inverted hammer saw resistance at the 5,729 level, which happens to be the Fibonacci 3 retracement from the peak in May to low in June.
• Nikkei 225 : Continues to consolidate in the 2015 high but high correlation with the USDJPY should worry the long holders of the Nikkei.
• Hang Seng: The preferred Asia indices to be longed as it closed above the Fib7 retracement with possible targets towards 26,824 and 27,486.
• S&P 500: Closed at all time high on Friday with the uptrend channel greatly respected.
• Crude: Tough resistance at $47.09/barrel at the Fib3 retracement from January high to low in June. Break of it should see Crude float higher towards the next resistance at $48.65/b, the Fib5 retracement.
• XAUUSD: Enjoyed its biggest one day move since early June but still fail to closed above the 200 day moving average on the daily. A rising wedge formation since July could mean Gold breaking lower as it respect the 200 days moving average and the uptrend line since January 17.
  

KVP's portfolios (please click to enlarge)

























For more on forex, click here.

  – Edited by Robert Ryan

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].