Weekly Fundamentals - 11 February 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
 
In conclusion to our report three weeks ago we wrote:
"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."
 
Now let's see how we fared on our recommendations:
Trading the USD from the long side was good as the USD Index moved higher
Standing aside from precious metals on the long side was incorrect as both gold and silver continued their moves higher
Selling risk into strength was given plenty of opportunities as higher highs were witnessed in many indices
It was a good week for the 30 Year Bond as it rose well.
 
A reasonable week.
 
A relatively busy week in terms of data.
 
USD: The US$ Index closed higher last week.
We start on Tuesday with PPI expected to remain unchanged at 0.3%. FED Chairperson also speaks.
On Wednesday we have CPI and Core CPI which excludes food and energy. The former number is thought to be unchanged at 0.3% whilst the latter is also expected unchanged at 0.2%.
This is followed by Retail sales and Core Retail sales which excludes cars. the former is thought to decline from 0.6% to 0.1% whilst the latter is anticipated to rise from 0.2% to 0.4%.
We also have Crude Oil Inventories and the FED Chairperson speaks again.
On Thursday we start with Building Permits, followed by the FED Manufacturing Index and finally the usual Unemployment Claims number. Figures for these three items are not available as we go to print.
COT data shows that large commercials marginally decreased their net short position in the US$ Index from -55,296 to -53,336 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO: The EURO fell meaningfully against the USD last week.
Only one item for the EURO this week.
On Tuesday we have the German GDP number which is anticipated to rise from 0.2% to 0.5%.
COT data for the Euro shows that large commercials decreased their net long position from +53,278 to +48,855 last week. We therefore remain NEUTRAL.
 
GBP: The GBP was virtually unchanged against the USD last week.
We start with CPI on Tuesday estimated to rise from 1.6% to 1.9%.
On Wednesday we have Average earnings thought to remain static at 2.8% and the Claimant Count Change expected to make a sizeable rise from -10,100 to +1,100.
Finally on Friday we have Retail sales.
COT data shows that large commercials increased their net long position from +69,775 to +75,079 last week. We therefore remain SLIGHTLY BULLISH.
 
YEN: The YEN fell slightly against the USD last week.
There is only one item for the YEN this week.
On Sunday we have the GDP number expected to remain unchanged at 0.3%.
COT data shows that large commercials decreased their net long position from +81,432 to +79,022 last week. We therefore remain BULLISH.
 
AUD: The AUD fell very marginally against the USD last week.
A quiet week for the AUD.
On Wednesday we have the Employment Change number and the Unemployment rate. Data for both are unavailable as to go to print.
COT data shows that large commercials significantly increased their net short position from -15,530 to -25,435. We therefore alter our view from NEUTRAL to SLIGHLTY BEARISH.
 
CNY: Two items for the CNY this week.
On Monday we have both CPI and PPI. The former is thought to rise from 2.1% to 2.4% and the latter from 5.5% to 6.6%.

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 increased their net short position from -28,684 to -36,345 last week. We therefore remain BEARISH.
RUSSELL2000: The RUSSELL2000 rose last week. Large commercials decreased their net short from -61,264 to -57,051 last week. We therefore remain BEARISH.
NASDAQ100: The NASDAQ100 rose last week. Large commercials decreased their net short position from -102,786 to -92,001 last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD rose last week. Large commercials slightly increased their net short position from -131,803 to -134,146 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 -89,413 to -92,712 last week. We therefore remain BEARISH.
COPPER: COPPER rose strongly last week closing near its high. Copper is an important metal as it is a leading indicator for many commodities. Large commercial slightly decreased their net short position from -57,779 to -54,662 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 slightly decreased their net short position from -509,138 to -504,483 last week. This continues to be a 52 week extreme. We therefore remain BEARISH.
 
The gold:silver ratio increased from 69.83 to 68.76 indicating silver outperformance over the period.

DEBT:
US 30 YEAR BOND: The BOND rose last week. Large commercials slightly decreased their net long position from +80,845 to +76,916 last week. We therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ fell last week. Large commercials substantially increased their net short position from -9,949 to -18,938 last week. We therefore remain SLIGHTLY BEARISH.
NZD: The NZD fell strongly last week. Large commercials massively increased their net short position from -925 to -3,661 last week. This is close to a 52 week low. We therefore remain BEARISH.

THOUGHTS FOR NEXT WEEK
Not much in the way of COT changes except to reiterate our short term bearish stance on the commodity backed currencies as we move to slightly bearish on the AUD. This means that we are now bearish on all the commodity backed currencies.
Risk remains well bid as market participants continue to view Trump's administration as being business friendly. This euphoric situation needs to be taken advantage of.
Follow the fortunes of the YEN very carefully. Any meaningful strength means that the Carry Trade is being unwound which will be the precursor for the correction in risk we anticipate is relatively close at hand.
 
Therefore our recommendations for next week are:
Continue trading USD from the long side especially against the commodity currencies but be prepared to exit the trade on negative USD/YEN movement
Our recommendations from last week remain the same:
Stand aside from precious metals on the long side
Sell risk on strength
Continue accumulating the 30 Year Bond.
 
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