Weekly Fundamentals - 03 February 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report three weeks ago we wrote:
"As anticipated last week the USD was and continues to be due a corrective bounce.
This is born out by the slight changes to our COT readings for the GBP and NZD.
We would therefore recommend standing aside from trading against the USD until our next report. This also means that we may see a continuation of the downside correction in precious metals.
COT readings for risk are not good and we would therefore continue to sell into any further strength.
 
Therefore our recommendations for next week are:
Leave FX alone
Stand aside from precious metals on the long side
Sell risk on strength
Continue accumulating the 30 Year Bond."
 
Now let's see how we fared on our recommendations:
We had no recommendations for FX expecting a corrective bounce in the USD. This most certainly did not happen so this was a wrong call
Standing aside from precious metals was also incorrect as both gold and silver performed well
Selling risk into strength was provided with many opportunities
Accumulating the 30 Year Bond was a good call.
 
An average week at best.
 
A very quiet week in terms of data.
 
USD: The US$ Index closed lower last week.
Only three items for the USD this week.
On Wednesday we have Crude Oil Inventories.
On Thursday we have the usual Unemployment Claims figure anticipated to be 249,000 from the previous 246,000.
Finally on Friday we see Consumer Sentiment expected to decline from 98.5 to 97.9.
COT data shows that large commercials marginally decreased their net short position in the US$ Index from -56,513 to -55,296 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO: The EURO rose against the USD last week.
There is no data for the EURO this week.
COT data for the Euro shows that large commercials decreased their net long position from +60,267 to +53,278 last week. We therefore remain NEUTRAL.
 
GBP: The GBP fell slightly against the USD last week.
Two items for the GBP this week.
On Wednesday we have the EU Membership Vote when the Parliament of the United Kingdom will vote to decide to Confer power on the Prime Minister to notify, under Article 50(2) of the Treaty on European Union, the UK’s intention to withdraw from the EU.
On Friday we have Manufacturing Production thought to decline from 1.3% to 0.3%.
COT data shows that large commercials decreased their net long position from +73,025 to +69,775 last week. We therefore remain SLIGHTLY BULLISH.
 
YEN: The YEN rose well against the USD last week.
There is no data for the YEN this week.
COT data shows that large commercials decreased their net long position from +95,853 to +81,432 last week. We therefore remain BULLISH.
 
AUD: The AUD rose strongly against the USD last week.
A busy week for the AUD.
Sunday night sees the release of Retail Sales anticipated to rise from 0.2% to 0.3%.
Monday we have both the Cash Rate which is the interest rate charged on overnight loans between financial intermediaries, expected to remain at 1.50%. This is followed by the RBA Rate Statement.
On Thursday we have more RBA action when the Governor speaks and the RBA Monetary Policy Statement.
COT data shows that large commercials significantly increased their net long position from -9,193 to -15,530. We therefore remain NEUTRAL.
 
CNY: Two items for the CNY this week.
We start on Sunday with the Services PMI figure thought to improve from 53.4 to 53.6.
On Thursday we have the Trade Balance number expected to rise from 275B to 295B.
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 rose last week. Large commercials massively decreased their net short position from -72,982 to -28,684 last week. We therefore alter our view from back from VERY BEARISH to BEARISH.
RUSSELL2000: The RUSSELL2000 rose last week closing on its high. Large commercials decreased their net short from -82,696 to -61,264 last week. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 rose last week. Large commercials increased their net short position from -86,604 to -102,786 last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD rose last week. Large commercials slightly increased their net short position from -126,374 to -131,803 last week. Now that large commercials hold a net short position which is smaller than 200,000 we are slightly bullish. We therefore remain SLIGHTLY BULLISH.
SILVER: SILVER rose last week. Large commercials slightly increased their net short position from -83,084 to -89,413 last week. We therefore remain BEARISH.
COPPER: COPPER fell last week closing near its low. Copper is an important metal as it is a leading indicator for many commodities. Large commercial slightly increased their net short position from -51,724 to -57,779 last week. Large commercials generally carry a net neutral position. This is now a substantial short position and remains close to a 52 week extreme. We therefore remain BEARISH.
CRUDE OIL: CRUDE closed slightly higher last week. Large commercials increased their net short position from -497,940 to -509.138 last week. This continues to be a 52 week extreme. We therefore remain BEARISH.
 
The gold:silver ratio increased from 69.59 to 69.83 indicating slight silver underperformance over the period.

DEBT:
US 30 YEAR BOND: The BOND rose very marginally last week. Large commercials increased their net long position from +71,362 to +80,845 last week. We therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ rose last week. Large commercials substantially increased their net short position from -3,042 to -9,949 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH.
NZD: The NZD rose last week. Large commercials massively decreased their net long position from +8,797 and are now net short -925 last week. We therefore alter our view from SLIGHTLY BULLISH to BEARISH.

THOUGHTS FOR NEXT WEEK
Changes in COT are slight but telling.
We continue to forecast a USD bounce and changes in the CAN$ and NZD in particular and less so in the AUD confirm this.
This means that the precious metals remain susceptible to a correction albeit a short lived one.
Risk remains precarious.
Bonds remain a buy.
 
Therefore our recommendations for next week are:
Trade the USD from the long side especially against the commodity currencies
Stand aside from precious metals on the long side
Sell risk on strength
Continue accumulating the 30 Year Bond.
 
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