Macro Monday WK 20: Markets await China data dump — #SaxoStrats
- 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
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.
- 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.
- 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.
- 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%
- 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
Please see our Q2 Outlook here.
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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].