Weekly Fundamentals - 02 July 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 

In conclusion to our report last week we wrote:
"There is not a great deal to say for next week with the exception that it will be GBP and EU driven.
COT data changes have been marginal but they are figures up to last Tuesday only so the volatility we witnessed towards the end of the week will be reflected in next week's figures.
However based on what we did witness last week our trading thoughts are as follows:
 
Buy the GBP as it is due a corrective bounce from a 30 year low
Continue selling precious metals especially gold
Short the 30 year Treasury Bond
Trade risk from the long side but stay very nimble."
 
Now let's see how we fared on our recommendations:
We recommended buying GBP anticipating a corrective bounce. We were very wrong.
Selling precious metals was also very wrong.
Shorting the 30 year Treasury Bond was correct.
Trading risk from the long side was also correct.
 
Whilst we got 50% of our recommendations right I would classify the week as a bad one as the rise in gold was very large and the fall in the GBP was also reasonably large.
 
Next week is quiet in terms of data but sentiment and volatility will once again be GBP and UK politics driven. Also as it is the first week of the month we therefore have the NonFarm data this Friday.
 
USD:The US$ Index rose last week.
On Wednesday we have Non-Manufacturing PMI expected to rise from 52.9 to 53.5. This is followed by the FOMC Meeting Minutes.
On Thursday we have the ADPO NonFarm Employment Change which excludes both the nonfarm and government sectors. It is expected to fall from 173,000 to 151,000. The usual Thursday Unemployment Claims number is anticipated to be 272,000 from the previous 268,000. Thursday also sees the Crude Oil Inventories figure.
Friday is the big day with Average Hourly Earnings expected to remain static at 0.2%, NonFarm Employment Change expected to be large from last month's abysmal 38,000 at 181,000 and finally the Unemployment Rate which is thought to be 4.8% from the previous 4.7%.
COT data shows that large commercials slightly increased their net short position in the US$ Index from -13,195 to -14,839. This remains close to a 52 week rolling extreme. We therefore remain VERY BULLISH.
 
EURO:The EURO rose against the USD last week.
There is no data for the EURO this week but naturally all attention will be focused on any developments between the EU and the UK.
COT data for the Euro shows that large commercials very marginally increased their net long position from +73,398 to +76,653. As this is the third week in a row that large commercials increase their net long position we alter our view from SLIGHTLY BEARISH toNEUTRAL.
 
GBP: The GBP fell against the USD last week. It is trading at a 31 year low.
A busy week in terms of data, political intrigues and continuing BREXIT fears.
On Monday we have Construction PMI which is thought to fall from 51.2 to 50.6.
On Tuesday Services PMI is also likely to fall from 53.5 to 53.1.
Also On Tuesday BOE Governor speaks.
Thursday we have Manufacturing Production which is expected to go to a negative -1.4% from the previous 2.3%.
COT data shows that large commercials decreased their net long position from +68,128 to +57,040. As this remains reasonably close to the 52 week extreme we therefore remainVERY BULLISH.
 
YEN:The YEN rose very marginally against the USD last week.
Two items for the YEN.
On Wednesday the BOJ Governor speaks.
On Thursday we have the Current Account figure which is expected to contract slightly from 1.63T to 1.52T.
COT data shows that large commercials very marginally increased their net short position from -56,542 to -58,067 which is close to a 52 week extreme. We therefore remainBEARISH.
 
AUD:The AUD rose against the USD last week.
A busy week for the AUD.
On Sunday we have Building Approvals expected to fall to -3.6% from 3.0%.
On Monday we see both Retail sales and the Trade Balance. The former is expected to rise slightly from 0.2% to 0.3% whilst the latter is thought to worsen from -1.58B to -1.72B.
Tuesday sees the Cash rate which is the interest rate that is charged on overnight loans between financial intermediaries. It is expected to remain at 1.75%. We also have the RBA Rate Statement.
COT data shows that large commercials decreased their net long position from +6,143 and are now net short at -1,915. We therefore alter our view fromNEUTRAL to SLIGHTLY BEARISH.
 
CNY:There is no data for the CNY this week.
There is no COT data for the CNY.
 
COT data of note on products we regularly comment on in our DAILY REPORTS and WEEKLY BONUS VIDEOS and for those products which show large commercials with extreme net positions.
 
S&P500: Large commercials increased their net short position from -59,567 t0 m-74,325 last week. We therefore remain BEARISH.
GOLD: Large commercials increased their net short position from -312,137 to -326,321 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish and as it is now once again above the 300,000 mark we remain VERY BEARISH.
SILVER: Large commercials increased their net short position from -89,936 to -95,201 last week. We therefore remain VERY BEARISH.
 
The gold:silver ratio decreased from 74.24 to 67.94 indicating MASSIVE silver outperformance last week.
 
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net long from +34,485 to +22,484 last week. Large commercials generally carry a net neutral position. This therefore remains an interesting situation on the long side and we therefore remain SLIGHTLY BULLISH.
US 30 YEAR BOND: Large commercials substantially decreased their net short position from -124,426 to -86,879 last week. This is now no longer near the 52 week extreme. We therefore alter our view from VERY BEARISH to BEARISH.
CRUDE OIL: Large commercials very slightly decreased their net short position from -317,581 to -307,784 last week. This continues to be close to a 52 week extreme and we therefore remain BEARISH.
CAN$: Large commercials very slightly increased their net short position from -14,134 to 15,439 last week. We therefore remain BEARISH.
NZD: Large commercials decreased their net long position +814 to 278 last week. We therefore remain NEUTRAL.
NASDAQ100: Large commercials meaningfully decreased their net short position from -79,805 to -41,194. As this is no longer close to a 52 week extreme we alter our view from VERY BEARISH to BEARISH.
RUSSELL2000: Large commercials substantially increased their net long position +16,037 to +37,197. We therefore alter our view from NEUTRAL to BULLISH.

THOUGHTS FOR NEXT WEEK
This week will be driven by the political drivel from the UK and the employment data i s the USA at the end of the week.
We are entering the quieter summer months of trading now so any major political/economic news will have an exponential affect on thin markets.
We remain of the view that risk is once again a trading buy whilst precious metals are extremely overbought in the short term.
Any rise in risk will be USD positive especially against the commodity currencies and this is borne out by the COT data.
The GBP has the potential of making a surprise rapid rise especially once the political shenanigans are over and done with.
 
Therefore our recommendations for next week are:
Sell precious metals
Sell AUD and NZD
Trade risk on the long side through either the NADAQ100 or preferably through the RUSSELL2000.
 

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Stay nimble. Good luck trading.


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