Article / 15 May 2017 at 2:58 GMT

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

Global Macro Strategist / Saxo Bank Group - Singapore Hub
  • 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.
 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


Source: Bloomberg

 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]. 

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


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