Weekly Fundamentals - 29 October 2016

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report two weeks ago we wrote:
"Very similar thoughts to two weeks ago.
It continues to all hinge on the USD.
We are quickly approaching the US presidential election in November. Trump seems to be determined to kill off any chance he has of winning but the closer we get to the election date the more violent the opinion poll swings will be. The USD will swing wildly in conjunction.
Which currencies will benefit the most?
It would seem that the EURO stands the best chance of benefitting.
The GBP remains problematic. COT indicates it is an absolute buy whilst the market continues to pile in on the short side. The swing when it happens will be ferocious and many will suffer deeply.
Precious metals have fallen considerably of their highs and are now beginning to show signs of value.
Risk is beginning to show signs of problems.
 
Therefore our recommendations for next week are:
Stay wary of the USD
Buy precious metals in very small quantities
Buy GBP in very small quantities
Buy the EURO."

Now let's see how we fared on our recommendations:
The USD rallied so that was a bad call
Accumulating the precious metals was correct
Buying the EURO was also right
Buying STG was incorrect.
 
An average week.

A very busy week in terms of data for the USD, GBP and AUD.
As this is the first week of the month we have the usual NonFarm Payroll data on Friday.
 
USD:The US$ Index rose sharply and closed on its highs last week.
We start on Tuesday with Manufacturing PMI which is expected to decline from 55.4 to 54.6.
Wednesday is an important day. We start with Crude Oil Inventories. This is followed by the FOMC Statement, the Fed Funds Rate expected to remain at 0.50% and the Trade Balance figure thought to improve from -2.01B to -1.71B.
Thursday witnesses the usual Unemployment Claims figure. This is followed by Non Manufacturing PMI anticipated to decline from 57.1 to 56.2.
Friday is the big day.
Average Hourly Earnings is thought to rise from 0.2% to 0.3%. The NonFarm Payroll number is anticipated to rise from 156,000 to 175,000 and finally the Unemployment Rate is also expected to improve from 5.0% to 4.9%.
COT data shows that large commercials increased their net short position in the US$ Index from -51,769 to -59,317 last week. We therefore remain BEARISH.
 
EURO: The EURO rose against the USD and closed on its highs last week.
There is no data of note for the Euro this week.
COT data for the Euro shows that large commercials increased their net long position from +125,407 to +138,083 last week which is a 52 week rolling high. We therefore remain BULLISH.
 
GBP: The GBP fell slightly against the USD last week. The GBP continues to trade at a 31 year low against the USD.
A busy week for the GBP.
On Tuesday we have Manufacturing PMI estimated to decline from 55.4 to 54.6.
Wednesday sees the release of Construction PMI also thought to decline from 52.3 to 51.9.
Thursday is the big day.
We start with Services PMI which is anticipated to marginally fall from 52.6 to 52.5.
This is followed by the BOE Inflation Report, the MPC Official Bank Rate Votes thought to remain at 0-0-9 meaning that all members voted for rates to remain the same, the Monetary Policy Summary and the Official Bank rate expected to remain at 0.25%.
COT data shows that large commercials slightly decreased their net long position from +101,766 to +98,795 last week. As this continues to be close to a 52 week extreme we remain VERY BULLISH.
 
YEN: The YEN rose against the USD last week.
A busy week for the YEN.
On Monday we have the BOJ Economic Outlook, the BOJ Policy Statement and the Monetray Policy Statement.
Tuesday has the BOJ Press Conference.
COT data shows that large commercials very slightly increased their net short position from -27,525 to -28,157 last week. We therefore remain NEUTRAL.
 
AUD: The AUD fell against the USD last week.
On Monday we have the Cash Rate expected to remain unchanged at 1.50% and the RBA Rate Statement.
Tuesday witnesses Building Approvals which is thought to fall from -1.8% to -2.8%.
On Wednesday we have the Trade Balance expected to improve from -2.01B to -1.71B.
Finally on Thursday we have the RBA Monetary Policy Statement and Retail Sales expected to be unchanged at 0.4%.
COT data shows that large commercials increased their net short position from -37,615 to -40,171 last week. We therefore remain NEUTRAL.
 
CNY: A busy week for the CNY.
On Monday we have Manufacturing PMI expected to be 50.3 from 50.4. This is followed by Non -Manufacturing PMI.
On Wednesday we have Services PMI expected to rise from 52.0 to 52.5.
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: The S&P500 fell last week. Large commercials substantially decreased their net short position from -84,773 to -22,395 last week. We therefore alter our view from BEARISH to SLIGHTLY BEARISH.
RUSSELL2000: The RUSSELL2000 fell last week. Large commercials decreased their net short from -13,788 to -9,683 last week. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 fell last week. Large commercials increased their net short position from -160,550 to -164,651 last week. We therefore remain BEARISH.
 
COMMODITIES:
GOLD: GOLD rose last week. Large commercials increased their net short position from -160,550 to -217,599 last week. Now that large commercials hold a net short position which is greater than 100,000 we are bearish but as it is now less than the 300,000 mark we remain NEUTRAL.
SILVER: SILVER rose last week. Large commercials decreased their net short position from -74,911 to -73,396 last week. We therefore remain BEARISH.
COPPER: COPPER rose last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials increased their net long position from +8,513 to +12,756 last week. Large commercials generally carry a net neutral position. This is a bullish position. We therefore alter our view from SLIGHTLY BULLISH to BULLISH.
CRUDE OIL: CRUDE fell slightly last week. Large commercials increased their net short position from -408,739 to -414,501 last week. As this is a 52 week extreme we remain BEARISH.
 
The gold:silver ratio decreased from 72.33 to 71.94 indicating silver outperformance last week.
 
DEBT:
US 30 YEAR BOND: The BOND fell last week. Large commercials decreased their net short position from -6,292 to -5,403 last week. We therefore remain SLIGHTLY BULLISH.
 
OTHER FX:
CAN$: The CAN$ fell last week. Large commercials increased their net long position +15,506 to +21,648 last week. We therefore remain BULLISH.
NZD: The NZD rose slightly last week. Large commercials decreased their net short position from -924 to -888 last week. We therefore remain NEUTRAL.
 
THOUGHTS FOR NEXT WEEK
Only eight days to go before the US elections.
Will the establishment prevail or will Trump surprise?
The USD will be volatile which will have a direct bearing on the precious metals.
However COT is telling us that it is wise to remain wary of risk and the USD whilst slightly less so on the metals.
This is an important week with the NonFarm Payroll data and much central bank activity which will drive sentiment and volatility as will swings in opinion polls.
It will be interesting.
 
Therefore our recommendations for next week are:
Stay wary of the USD
Continue accumulating precious metals
Continue buying the EURO
Continue selling risk.
 
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