Article / 15 May 2017 at 2:58 GMT

Macro Monday WK 20: Markets await China data dump — #SaxoStrats

Global Macro & Crypto Strategist [Asia based] / Saxo Bank Group
Singapore
 
  • The release of data from China will be a key focus in the coming week
  • The May 18 jobs data release could impact the flagging Australian dollar
  • GBP looks overpriced, and assumes a soft Brexit with minimal difficulties
By Kay Van-Petersen

A replay of the global macro weekly call for week 20 is available here.

Summary of last week
  • Centrist candidate Emmanuel Macron won the French presidential election by a significant margin. 66% to 34% versus polls of 60% - 40%. Stocks fail to carry positive momentum as profit taking ensues.
  • Donald Trump fired FBI director James Comey leading to comparisons with former president Richard Nixon and the Watergate scandal that brought him down.
  • North Korea fired another missile after Moon Jae-In victory to be next Korean president.
  • Wilbur Ross confirms 3% growth will not be achievable this year but may be possible if Trump’s tax reform goes through.
  • Australian government federal budget sees increased fiscal spend on infrastructure and plans to return to surplus.
  • Yields climbed steadily with US 10 year yields traded above 2.4% for the first time since March. However, yields crashed lower on Friday to close weak at 2.33% following weak retail/CPI data which also lifted JPY crosses.
  • DXY generally higher, but closed the week on a weak note post US data.
  • Safe Haven currencies the worst performers: CHF, JPY.
  • NZD: Tumbles 1.5% mid-week on dovish RBNZ statement unexpectedly despite recent strong data.
  • Retail sales in US has been poor after weak result from consumer giants Macy and Kohl has called into question the health/death of the US retail business.
  • Oil rebounded strongly through the week buoyed by bullish EIA inventory and chatter from Opec of an extension to current output cuts.
  • Iron ore continues to slump on concerns over Chinese tightening.
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 President Xi Jinping hosted world leaders at the One Belt, One Road summit in Beijing, which is designed to boost trade and further China's soft power influence. Photo: Shutterstock

COT report, May 9
  • Marginal pickup in USD long positioning.
  • CAD shorts continue to be built with net short positions at one week high.
  • MXN longs continue to build and currently at 52 week high.
  • JPY positioning changed to marginal net shorts.
The week ahead
  • Key focus: China data dump; UK data; Australian jobs data
  • Focus on Chinese data intensifies after signs of a slowing in economic activity and the global reflation trade theme could be threatened. Its is election year in China; and take note that China is tightening from a position of strength and underlying trend in data is positive.
  • With market net short on AUD, the May 18 jobs data release from Australia will be important after AUD suffered the most of the G10 currencies.
  • GBP is currently overpriced. It is priced for a soft Brexit with minimal issues. Economic data is turning south as inflation picks up resulting in real wage compression.
  • Central banks: Mexico (May 18) 6.5% no change; Indonesia (May 18) BI 4.75% no change.
  • Federal Reserve speakers: Loreta Mester (May 18); James Bullard (19); John Williams (20).
  • Other: RBNZ’s McDermott; Dr Angela Merkel; UK Prime Minister Theresa May; German Finance Minister Wolfgang Schaeuble; European Central Bank's Ewald Nowotny, Yves Mersch, Mario Draghi; Ben Bernanke.
Economic side
  • May 15 China retail sales 10.3%; FAI 9.1%; IP 7%; Japan PPI; US Empire State Manufacturing 6.
  • May 16: Norway GDP 0.3%; UK CPI 2.6% & RPI 3.4%; Germany: ZEW; Eurozone: GDP  1.7% y/y ; US Industrial Production 0.4%.
  • May 17: Japan: Industrial Production; UK: Average hourly earnings; Unemployment; Eurozone: CPI 1.9%.
  • May 18: Japan: GDP  0.4%; Australia: Jobs Data +5,000, unemployment rate 5.9% ; UK: Retail Sales 0.7%. 19th: Germany: PPI; Canada: Retail Sales and CPI 1.7%
Technical Picture: James Kim
  • USDJPY: Descending Triangle pattern broke down but floated back out in the weekly chart and now back above the Ichimoko cloud. Currently testing the Fibonacci 2 retracement at ¥113.971 after rebounded from the Fibonacci 5 level. Need a close above ¥113.971 for momentum to go higher.
  • XAUUSD: Gold on 2017 support trendline in the weekly. On the daily chart, XAUUSD is oversold in stochastics, but gold is still in the five years downward trend line since 2012.
  • EURUSD: Weekly chart showed that EURUSD is rejected on its 100 days MA and has not fill the gap post the first round of French election.
  • DXY: Falling wedge indicate that trend is bullish and may suggest a weaker EURUSD this week should DXY goes higher.
  • EURJPY: Hangman candle in the weekly chart suggest upside exhaustion and after three weeks of consecutive advances, we may see a lower EURJPY this week.
  • EURGBP: GBP overpriced. On a longer term basis, we have a descending triangle with support at 0.834.
  • Oil broke out from its symmetrical triangle breakout as USDCAD broke out in the daily. 1.383 will be the level to watch. Fibonacci 6 retracement
  • Nikkei 225: Japan index finding resistance at 20,000.
  • S&P 500 can’t close above 2,400 with bias on the downside. Fibonacci 2 retracement  at 2,262.43 . ATR, a measure of price volatility has been declining and move +/- 30 points on a weekly basis.
  • Silver leads the price volatility while S&P and Dow is at the bottom spectrum in the equity market. Italy index is the highest in the equities market.

Current price volatility

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Source: Bloomberg
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 Source: Bloomberg


Please see our Q2 Outlook here.

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]. 

15 May
Morris Morris
A strategic summation would be helpful otherwise
we are just overloaded?
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