Weekly Fundamentals - 30 November 2015

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
This week's piece is a day late as COT data has only been produced today due to last week's Thanksgiving national holiday.
In last week's piece we wrote that 'the following week would be driven by the unexpected FED announcement after their closed door meeting on Monday, continued ongoing European government announcements/ statements regarding real and imagined terrorist plots, the shortened trading week in the USA and a general thinning of liquidity as we start the countdown to the Christmas and New Year holiday break.' Nothing came of the FED closed door meeting, governments perceive both real and imaginary enemies everywhere, the markets and the markets were thin.
This week is a busy one in terms of economic data and because it has the first Friday of the month we also have NonFarm Payroll data.
 
USD: The week starts on Tuesday when we have Manufacturing PMI expected at 50.6 up from last month's 50.1.
On Wednesday we have the ADP NonFarm Employment Change number thought to be 1912,000. This figure excludes government hiring. Also on Wednesday the FED Chairperson speaks.
Thursday sees the release of the customary Unemployment Claims figure estimated at 269,000. The Fed Chairperson continues to speak and we have Non manufacturing PMI expected to be 58.1 from last month's 59.1.
Friday is the big day when we have NonFarm Payroll thought to be 201,000 from last month's 271,000 and the Unemployment rate anticipated to remain unchanged at 5.0%.
COT data shows that large commercials continued to increase their net short position slightly in the US$ Index from 57,966 to 58,105. We therefore remain SLIGHTLY BEARISH.
 
EURO: A light weak in terms of data for the EURO with only two items one of which however is very important.
Both take place on Thursday when we have the Minimum Bid Rate which is the interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system within the Eurozone. It is expected to remain at 0.05%.
Importantly we have the ECB Press Conference.
COT data for the Euro shows that large commercials again increased their net long position from 204,152 to 215,922. We therefore continue to remain BULLISH.
 
GBP: On Tuesday we have both the Bank Stress Test Results which measures the balance sheets of large banks in an effort to determine the banks' stability and capital reserve adequacy. We also hear from the BOE Governor.
Wednesday sees the release of Construction PMI which is expected to fall slightly from last month's 58.8 to 58.4.
On Thursday we have Services PMI estimated to be 55.1 up from last month's 54.9.
Large commercials continued to increase their net long position from 45,232 to 51,379. We therefore remain BULLISH.

YEN: We have only one item for the YEN this week which is Retail sales on Sunday night. it is expected to show a meaningful rise from last month's negative 0.1% to a positive 0.9%.
COT data shows that large commercials very slightly reduced their net long position from 111,224 to 107,933. We therefore remain BULLISH.

AUD: A full week for the AUD.
On Monday we have the Cash rate figure expected to remain at 2.00%. This is the interest rate charged on overnight loans between financial intermediaries. We also hear the RBA Rate Statement.
On Tuesday the RBA Governor speaks and witness the release of the GDP number which is expected to grow from last month's 0.2% to 0.7%.
On Wednesday we have the Trade Balance number which is expected to grow from -2.32Bn to -2.61Bn.
Finally on Thursday we have Retail Sales which is expected to remain unchanged at 0.4%.
COT data shows that large commercials reduced their net long position from 88,864 to 75,027. We therefore turn from BULLISH to SLIGHTLY BULLISH.

CNY: Only one item for the CNY which is Manufacturing PMI on Monday expected to show a slight increase from 49.8 to 49.9.
There is no COT data for the CNY.
 
COT DATA OF NOTE:
S&P500: Last week large commercials increased their net long position from 100,317 to 122,609. As long as large commercials remain net long to have to err on the side of being bullish. We therefore remain SLIGHTLY BULLISH.
GOLD: Large commercials again substantially reduced their net short position from 28,473 to 11,983. This is the fourth week running that large commercials reduce their net short position. We therefore remain BULLISH.
SILVER: Last week saw large commercials continue to decrease their net short position from 35,524 to 28,725. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.

THOUGHTS FOR NEXT WEEK
Next week will be all about NonFarm Payroll and the subsequent debate about whether the FED will or will not do anything with rates at the December Feb Meeting.
COT data whilst fairly unequivocally commodity and commodity currency bullish does not tell us when they will turn. All COT tells us is that we are at fairly major extremes and that when they do turn, the turn will be vicious.
Vicious turns in thin, illiquid markets can be quite spectacular!
 
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Stay nimble. Good luck trading.

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