Weekly Fundamentals - 01 October 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report last week we wrote:
"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."

Now let's see how we fared on our recommendations:
The USD rallied so that was not a good call.
Preferring gold to silver was correct as silver underperformed
Both the NZD and AUD rallied so this was good.
 
An average week.
 
A busy week in terms of data culminating in the usual first Friday of the month employment data in the US.
 
USD:The US$ Index rose strongly last week closing on its high.
We start on Monday with Manufacturing PMI expected to improve from 49.4 to 50.4
On Wednesday we have Non-Manufacturing PMI thought to make a strong move higher from 51.4 to 53.1 and Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims figure estimated to be virtually unchanged from last month at 255,000
Friday is the big day. We start with Average Hourly Earnings expected to rise very slightly from 0.1% to 0.2%.
The NonFarm Employment Change is expected to be 171,000 from 151,000 and the Unemployment Rate is anticipated to remain unchanged at 4.9%.
COT data shows that large commercials slightly decreased their net short position in the US$ Index from -19,173 to -17,421. We therefore remain BULLISH.
 
EURO:The EURO was virtually unchanged against the USD last week.
There is no data of note for the EURO this week.
COT data for the Euro shows that large commercials decreased their net long position from +99,943 to 87,842. We remain BULLISH.
 
GBP:The GBP fell slightly against the USD last week. The GBP continues to trade close to a 30 year low against the USD.
There are three items for the GBP this week, all PMI related.
We start on Monday with Manufacturing PMI expected to decrease from 53.3 to 52.1.
On Tuesday we have Construction PMI also expected to decrease from 49.2 to 49.1.
Finally on Wednesday we have Services PMI likewise expected to fall from 52.9 to 52.1.
COT data shows that large commercials substantially increased their net long position from +79,168 to 103,256. As this is once again close to a 52 week extreme we alter our view from BULLISH back to VERY BULLISH.
 
YEN:The YEN fell slightly against the USD last week.
Two items for the YEN this week both on Sunday.
The Manufacturing Index is expected to rise from 6 to 7 and the Non-Manufacturing Index to fall from 19 to 18.
COT data shows that large commercials increased their net short position from -53,306 to -62,263 last week. We therefore remain SLIGHTLY BEARISH.
 
AUD:The AUD rose against the USD last week.
A busy week for the AUD.
We start on Monday with Building Approvals anticipated to fall dramatically from 11.3%v to -5.8%.
This is followed by the Cash Rate which is the interest rate charged on overnight loans between financial intermediaries and is expected to remain unchanged at 1.50%.
Finally we have the RBA Rate Statement.
On Tuesday we have Retail Sales which is thought to rise from 0.0% to 0.2%.
Finally we have the Trade Balance number which is anticipated to make a slight improvement from -2.41B to -2.32B.
COT data shows that large commercials increased their net short position from -9,234 -18,169 to last week. We therefore remain SLIGHTLY BULLISH.
 
CNY:There is only one item for the CNY this week on Friday.
Services PMI is expected to be 52.1.
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: The S&P500 fell very slightly last week. Large commercials substantially decreased their net short position from -65,098 to -25,778 last week. We therefore remain SLIGHTLY BEARISH.
RUSSELL2000: The RUSSELL2000 fell very slightly last week. Large commercials increased their net short from -14,583 to -18,059 last week. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 rose slightly last week. Large commercials increased their net short position from -120,663 to -139,885 last week. We therefore remain BEARISH.
 
COMMODITIES:
GOLD: GOLD fell last week. Large commercials increased their net short position from -290,615 to -314,594 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 greater than the 300,000 mark we alter our view from BEARISH back to VERY BEARISH.
SILVER: SILVER fell last week. Large commercials increased their net short position from -96,945 to -100,818 last week. We therefore remain VERY BEARISH.
COPPER: COPPER rose last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials substantially decreased their net long position from +13,514 to +1,971 last week. Large commercials generally carry a net neutral position. This is a neutral position. We therefore alter our view from BULLISH to NEUTRAL.
CRUDE OIL: CRUDE fell slightly last week. Large commercials slightly increased their net short position from -285,831 to -296,867 last week. We therefore remain NEUTRAL.
 
The gold:silver ratio increased from 67.98 to 68.72 indicating silver underperformance last week.
 
DEBT:
US 30 YEAR BOND: The BOND fell slightly last week. Large commercials decreased their net short position from -20,871 to -12,656 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: The CAN$ fell last week. Large commercials decreased their net short position from -13,779 and are now net long +18,861 last week. We therefore alter our view from NEUTRAL to BULLISH.
NZD: The NZD rose last week. Large commercials decreased their net long position from +5,923 last week to +4,654. We therefore remain BULLISH.

THOUGHTS FOR NEXT WEEK
It all hinges on the USD.
We are quickly approaching the US presidential election in November. Any indication in the polls that Trump is doing well will have an adverse affect on the USD.
Which currencies will benefit the most?
According to COT it would seem that the AUD, NZD and CAN$ will benefit accordingly.
However COT for the precious metals is telling us that Clinton will prevail.
 
Therefore our recommendations for next week are:
Stay wary of the USD
Resume selling the precious metals
Resume buying the GBP. We like buying an asset trading at a 30 year low
Buy the CAN $, NZD and AUD.
 
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