Macro Monday: Wrapping up the first half of 2017 — #SaxoStrats
- The prospect of credit growth slowing dramatically or even reversing is in focus
- China is seen as a culprit of any credit growth slowdown
- There are doubts about whether the Fed will proceed with its interest rate moves
By Kay Van-Petersen
A replay of the global macro weekly call for week 26 is available here.
Summary of prior week
- Commodities to be offered with crude oil down 4% for the week.
- Reserve Bank of New Zealand: there was lack of follow through from governor Graeme Wheeler despite being 5% higher than previous meeting.
- There is divergence within the Bank of England, between governor Mark Carney, who is dovish, and the BoE chief economist Andy Haldane, who is a hawk
- Last week Fed speakers were mixed.
- The new King and Crown price in Saudi Arabia should see crude oil policy optimized.
COT report from June 20
- Continue selloff in the USD but we also saw a strong pullback in the euro, the Swiss franc, and the Australian dollar.
- Interesting to see a 35% reduction in shorts in GBP.
- Divergence in Nymex and ICE crude with a 31% decrease in NYMEX Crude and 27% increase in ICE crude.
- Big selloff in previous metals as well with gold and silver positioning reduced by 30% plus.
- Key focus: End of Q2/H1, Final PMIs and GDP, Global Credit.
- Central banks: No major central banks decisions scheduled.
- Fed Speakers this week: John Williams (June 26, 27 and 28), Patrick Harker (27), Janet Yellen (June 27), Neel Kashkari (June 27), James Bullard (June 29).
- Other: European Central Bank Forum June 26-28 (BoE governor Mark Carney, Bank of Japan governor Haruhiko Kuroda, Bank of Canada governor Stephen Poloz)
Thoughts on Market Positioning/Sentiment & Global Macro In General:
- Summer really starting to kick in, activity & general market interest seems to be falling – this could stretch into August, especially given that September really seems to be the next key meeting for the Federal Reserve.
- Will the Fed follow through on balance sheet reduction/or hike and/or delays in implementing their once more in 2017 / three times in 2018 – by the September 20 meeting; we should have had three more CPI data points, where will US 10s 2.14% and 30s 2.72% be then?
Noticing a few things lately
- A lot of research out there on credit growth slowing dramatically or in some cases reversing, with China being seen as a big culprit of this. Read through this is of course implications on slowing global growth in the second half of the year and into 2018.
- Of course no one talks or seems to focus on China’s ability to turn on the taps at will, just as they did in early 2016.
- Also just seems, like we are seeing another big wave of people calling for US recession, global slowdown, “the top”.
- People still very complacent about the Fed following through on the interest rate hikes that it has outlined. And the Donald Trump/Republican Party’s ability to get any big ticket items done is in focus: Healthcare, tax reform, deregulation, infra, etc. The bar and expectations are very low.
- US: Durable goods, Final Q2 GDP +1.2%e, PCE, Personal spending/Income, University of Michigan.
- China: PMI 51.0e 51.2p Services 54.5p .
- Eurozone: Flash CPIs.
- Germany: IFO, loans.
- Japan: RS, CPI.
- UK: Final Q2 GDP 2.0%p .
- AU: New homes, Private credit
- New Zealand: TB, Building Data
- Will this lead to a slower inflation prints globally going into the second half of 2017 and into 2018?
- Three more CPI and PFC data releases before the September 20 meeting, where the Fed is likely to act.
Global Macro Book: KVP
- AUDNZD long got stopped out at 1.0390 as Reserve Bank of New Zealand governor Graeme Wheeler failed to ‘release the dove’.
- The global strategic book is unchanged.
Technical picture: Edmund Liu
- Dollar index: Hovering around the support zone at 96.44 but also resisted at the trend line resistance a well. A break on the trendline should test 97.85, which is the Fibonacci 5 retracement.
- EURUSD: Double bottom formation but last week was resisted at the Fibonacci 5 retracement.
- GBPUSD: A break on the bullish wedge formation should see GBPUSD move higher. 1.2818 as first resistance.
- GBPCAD: Last week rebounded on the Fibonacci 5 retracement at 1.678 which also supported by the 200 day moving average. Buy on dips towards the 200 day moving average.
- Hang Seng: Has currently met resistance at the Fibonacci 7 retracement.
- Nikkei: Diverging RSI could mean possible top. Currently resisted at its 2016 high.
- S&P 500: Diverging as well, similar to Nikkei.
- ASX: Saw buying activity last week and initial resistance @ 5,792.31.
- USDCAD: covered last week by Edmund Liu as he initiated a long call. However is currently resisted by the 200 days moving average.
- GBPCAD : Last week rebounded on the Fibonacci 5 retracement at 1.678.
- WTI : Possible triple bottom formation with RSI showing oversold and could see rebound with RSI historically a decent indicator to track price divergence.
- XAUUSD : Buying recommence close to the 200 days moving average. Need a break above $1,268 for XAUUSD to move higher.
– 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].