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.
- 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.
- 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.
- 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
- 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.
- 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.
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– 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].