Weekly Fundamentals - 17 October 2015

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
Last week's price action was a continuation of the previous week when we saw commodities, commodity backed currencies and risk as measured by the S&P500 continue their rallies.
Whilst we anticipate this to continue for the first two asset classes we are cautious in the short term as COT data is being to weigh on them slightly.
This week is relatively light in terms of volume of economic data it is important as we have a number of Central bank governors speaking.
 
USD: There are only three items of note for the USD.
On Tuesday we have Building Permits which is expected to show a slight drop from last month's figure of 1.17M to 1.16M.
More importantly we have the FED Chairperson speaking.
On Thursday we have the customary Unemployment Claims figure expected at 266,000 from last week's 255,000.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from 53,248 to 44,938. We maintain our position of SLIGHTLY BEARISH.

EURO: It is a busier week for the Euro than it has been for the last few weeks.
On Thursday we have the Minimum Bid rate expected to remain unchanged at 0.05%. This is the interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system.
More importantly we have the ECB Press Conference. There is a small minority of market participants who expect the ECB to announce or make reference to another round of QE.
On Friday we have both French and German Manufacturing PMI both expected to show growth. The French number is expected at 50.2 and the German at 51.8.
COT data for the Euro shows that large commercials decreased their net long position from 108,507 to 97,015. We maintain our position of SLIGHTLY BULLISH.

GBP: Only two items for the GBP this week.
On Tuesday the BOE governor speaks.
On Thursday we have the Retail sales figure which is expected to grow from last month's 0.2% to 0.3%.
COT data for GDP shows that large commercials increased their net long position from 18,888 to 22,519. We therefore remain SLIGHTLY BULLISH.

YEN: There is absolutely nothing of note for the Yen this week.
COT data shows that large commercials reduced their net long position from 30,758 to 21,756. We maintain our NEUTRAL stance.

AUD: Only one item for the AUD.
On Monday we have the latest Monetary Policy Meeting Minutes.
COT data shows that large commercials decreased their net long position from 62,785 to 47,727. We therefore alter our view from SLIGHTLY BULLISH to NEUTRAL.

CNY: two items for the CNY both on Sunday.
The GDP number is expected to fall from the previous reading of 7% to 6.8% and the Industrial Production is likewise expected to fall from 6.1% to 6.0%.
There is no COT data for the CNY.
 
COT DATA OF NOTE:
S&P500: The recent fall in the S&P has seen large commercials move their positions dramatically over the last four weeks. Last week large commercials very slightly decreased their net long position from 156,749 to 149,134. This remains very close to last week's 52 week rolling high. We therefore have to continue to be BULLISH.
GOLD: Large commercials substantially increased their net short position from 88,469 to 118,494. Any large commercial short position greater than 100,000 is negative. We therefore alter our stance to BEARISH.
SILVER: Large commercials substantially increased their net short position for a second week in a row. Last week saw them increase from 49,502 to 58,6262 which is fast approaching the largest 52 week net short achieved in the third week of May at 62,485. We therefore remain BEARISH for the second week in a row.

THOUGHTS FOR NEXT WEEK
It all continues to hinge on the USD.
It would seem that market participants are undecided as to near term risk direction.
This means that the words of the various central bank heads this week will result in heightened volatility.
As it stands increased pessimism over the last few weeks for risk assets has resulted in a bounce and overt pessimism for commodities has also resulted in a bounce. Now that the bounce is well and truly underway a short sharp correction is the most likely outcome. In this way the market will ensure that the vast majority lose at the expense of the small minority.

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