Weekly Fundamentals - 09 January 2016

Last week we wrote that as it was the first week of the month and therefore the first Friday we had the US employment data to look forward to. As it happens the figure had little effect as the markets took direction all week from China where risk was sold convincingly. This affected global risk which had a bad week.

We completed our MACRO piece which analysed 2015 and gave our views on 2016. It can be read here.
This week is relatively light in terms of economic data but what we have is important.
USD: On Wednesday we have Crude Inventories.
On Thursday we have the usual Unemployment Claims figure estimated to be 278,00 unchanged from last week.
Friday is a busy day. We start with Core Retail sales and Retail Sales. The former excludes automobile sales.
We also have PPI and Consumer Sentiment.
COT data shows that large commercials increased their net short position slightly in the US$ Index from 41,185 to 48,881. We therefore remain SLIGHTLY BEARISH.
EURO: There is no data for the EURO this week.
COT data for the Euro shows that large commercials decreased their net long position from 182,071 to 179,372. We remain BULLISH.
GBP:  A busy week for the GBP.
On Tuesday we have Manufacturing Production expected to be 0.1% from last month's -0.4%.
Thursday is the big day when we have the MPC Official bank rate Votes expected to be unchanged from last month's 1-0-8 meaning that one member will vote for a rate hike, none for a decrease and the remaining eight for no change.
We also have the Monetary Policy Summary and the Official bank Rate expected to remain at 0.5%.
Large commercials increased their net long position from 49,672 to 54,401. We therefore remain BULLISH.

YEN: Only one item for the YEN this week.
On Monday we have the Current Account figure expected to be 1.52T up from last month's 1.49T.
COT data shows that large commercials dramatically decreased their net long position from 34,780 to 4,543. We therefore alter our view from NEUTRAL to BEARISH.

AUD: We have two items for the AUD this week both on Wednesday.
Employment Change is expected to be a negative 10,300 from the previous positive 71,400.
The Unemployment rate is expected to inch up to 5.9% from 5.8%.
COT data shows that large commercials slightly reduced their net long position from 33,568 to 26,056. We therefore remain NEUTRAL.

CNY: One item for the CNY on Tuesday when we have the Trade Balance number expected to be 339B from last month's 343B.
Market participants will be most interested to see if there are any further currency depreciations following last week's two.
There is no COT data for the CNY.
S&P500: large commercials increased their net short position from 28,007 to 41,874. The SP500 suffered a very bad week on the back of China. The move down was big and fast and therefore we believe that a short term corrective bounce is very possible. We therefore change our view from NEUTRAL to SLIGHTLY BULLISH even though COT has worsened.
GOLD: Large commercials very slightly increased their net short position from 15,335 to 19,275. This continues to be very close to being the smallest net short position since the only time this century they were net long on 11/12/01, which was nearly 14 years ago. We therefore remain SUPER BULLISH.
SILVER: Last week saw large commercials slightly decrease their net short position from 31,162 to 28,799. We therefore remain NEUTRAL.
The gold:silver ratio widened from 76.77 to 79.30 indicating silver underperformance for the week.

This is the second trading week for the New Year. The first one was traumatic for risk The second should see some stability return.
We are therefore sanguine at these levels for the SP500, continue to be bullish on commodities and mixed when it comes to the FX pairs in the short term with a slight bias to USD bearishness.
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