Weekly Fundamentals - 25 September 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"There are a number of changes to COT that have resulted in us making a few recommendation changes.
Whilst we have been bullish on the USD Index we are beginning to see slight changes not necessarily in currencies that form part of that index but in the more major commodity currencies for instance the AUD and the CAN$.
Our thoughts for the last couple of weeks regarding the US 30 Year Bond are beginning to materialise.
GBP has been disappointing to say the least. It closed very weak at its lows and whilst COT indicates it is a buy, its inability to stage any form of meaningful bounce does not bode it well.
Our view on the precious metals has been correct and whilst it should remain correct we begin to start reflecting when to start playing both gold and silver from the long side.

Therefore our recommendations for next week are:
Continue selling precious metals
Continue buying the GBP very slowly
Continue reducing risk
Bullish copper
Turn bullish on the US 30 Year Bond."
 
Now let's see how we fared on our recommendations:
Selling of gold and silver was the wrong call as both rallied
Continued buying of GBP was also premature as it fell
Reducing risk also proved expensive
Bullish on copper was correct in a very small way
Turning bullish on the US 30 Year Bond was also hasty.
 
A bad week.
 
Not much in the way of data but what we have for both the EURO and the USD is important.
 
USD:The US$ Index rose strongly last week closing on its high.
On Tuesday we have Consumer Confidence expected to fall from 101.1 to 98.6.
On Wednesday we have Core Durable Goods Orders which is thought to fall from 1.3% to -0.5% and Crude Oil Inventories. More importantly we have the FED Chairperson testifying before the Committee on Financial Services.
On Thursday we have the GDP figure which is estimated to rise to 1.3% from 1.1% and the usual Unemployment Claims number anticipated to rise from 252,000 to 260,000.
We also hear from the FED Chairperson again.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -22,546 to -19,173. We therefore remain BULLISH.
 
EURO:The EURO rose against the USD last week.
On Monday we have the German Business Climate figure which is expected to remain virtually the same from last month at 106.3. This is followed by the ECB President testifying before the Committee on Economic and Monetary Affairs of European Parliament.
On Wednesday the ECB President again speaks about current developments in the euro area.
COT data for the Euro shows that large commercials decreased their net long position from +103,223 to 99,943. We remain BULLISH.
 
GBP:The GBP fell against the USD last week. The GBP continues to trade close to a 30 year low against the USD.
There is only one item for the GBP this week which is the Current Account number on Friday. It is expected to improve marginally from -32.6B to -30.5B.
COT data shows that large commercials substantially decreased their net long position from +101,050 to +79,168. As this is no longer close to a 52 week extreme we alter our view from VERY BULLISH toBULLISH.
 
YEN:The YEN rose against the USD last week.
All activity for the YEN takes place on Thursday.
We have the BOJ Governor speaking.
We also have Household Spending expected to fall greatly from -0.5% to - 2.1% and Tokyo Core CPI which excludes fresh food and is expected to remain at last month's figure of -0.4%.
COT data shows that large commercials slightly increased their net short position from -50,204 to -53,306 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD:The AUD rose against the USD last week.
There are no newsworthy items for the AUD this week.
COT data shows that large commercials significantly decreased their net short position from -37,882 to -9,234 last week. We therefore alter our view from BEARISH to SLIGHTLY BULLISH.
 
CNY:There are two items for the CNY this week, both on Friday.
We have both Manufacturing and Non-Manufacturing PMI. The former is expected to rise very slightly from 50.4 to 50.5.
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.
 
RISK:
S&P500: Large commercials decreased their net short position from -76,900 to -65,098 last week. We therefore alter our view from BEARISH back to SLIGHTLY BEARISH.
RUSSELL2000: Large commercials increased their net short from -8,884 to -14,583 last week. We therefore alter our view from NEUTRAL back to BEARISH.
NASDAQ100: Large commercials increased their net short position from -100.401 to -120,663 last week. We therefore alter our view from NEUTRAL to BEARISH.
 
COMMODITIES:
GOLD: Large commercials decreased their net short position from -311,371 to -290,615 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish but now that it is now no longer above the 300,000 mark we alter our view from VERY BEARISH to BEARISH.
SILVER: Large commercials slightly increased their net short position from -96,675 to -96,945 last week. We therefore remain VERY BEARISH.
COPPER: Copper is an important metal as it is a leading indicator for many commodities. Large commercials decreased their net long position from +24,882 to +13,514 last week. Large commercials generally carry a net neutral position. We therefore remain BULLISH.
CRUDE OIL: Large commercials decreased their net short position from -308,955 to -285,831 last week. We therefore remain NEUTRAL.
 
The gold:silver ratio decreased from 69.83 to 67.98 indicating silver outperformance last week.
 
DEBT:
US 30 YEAR BOND: Large commercials increased their net short position from -15,925 to -20,871 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: Large commercials decreased their net short position from -18,511 to -13,779 last week. We therefore remain NEUTRAL.
NZD: Large commercials substantially decreased their net short position from -7,466 and are now net long +5,923 last week. We therefore alter our view from BEARISH to BULLISH.

THOUGHTS FOR NEXT WEEK
A number of interesting developments.
We are beginning to see slight but positive moves in terms of precious metals as well as commodity backed currencies.
The picture for risk remains vague as it does for debt.
There is a less bullish undertone to the USD which following BREXIT means a less bullish undertone for the GBP as well.
The EURO may be the main beneficiary.
 
Therefore our recommendations for next week are:
Begin taking profits on USD
Prefer gold to silver
Start acquiring both the NZD and AUD in that order.
 
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