Weekly Fundamentals - 24 March 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 
In conclusion to our report three weeks ago we wrote:
"The FED rate hike came and went with no fanfare. The FED announcement was benign with the possibility of no more than a further two hikes this year. Both bonds and risk liked it, but which liked it more?
Bonds liked it more. COT for the S&P500 worsened whilst for the 30 Year Bond improved substantially.
We have started following the AUD/YEN cross rate. This cross is a very good barometer of how healthy the market perceives risk. The AUD is a commodity backed currency whilst the YEN has been the currency of choice for the 'carry trade' whereby traders borrow a cheap currency (the YEN with its long standing negative rates) and invest in risk elsewhere. If/when the YEN makes a substantial rise higher it bodes ill for risk. This is especially true if it moves aggressively higher against the AUD which as an exporter of natural resources will bear the brunt of any economic slowdown.
 
Therefore our recommendations for next week are:
Continue accumulating gold slowly on weakness
Sell risk outright
Buy the GBP
Watch the AUD/YEN cross rate very closely".

Now let's see how we fared on our recommendations:
Selling risk outright was a good call as the S&P500 fell convincingly
Accumulating gold was very good
Buying the GBP was reasonable as it rose marginally
Watching the AUD/YEN gave us a very good leading indicator on risk as the AUD fell sharply in this pair.
 
An excellent week.
 
Another very quiet week in terms of data.
 
USD: The US$ Index closed substantially lower last week.
A very quiet week in terms of data.
On Tuesday we have Consumer Confidence which is thought to fall from 114.8 to 113.9.
On Wednesday we have Crude Oil Inventories.
Thursday we have the usual Unemployment Claims figure estimated to be 244,000 from the previous 261,000.
Finally we have the GDP number expected to rise to 2.0% from 1.9%.
COT data shows that large commercials decreased their net short position in the US$ Index from -54,314 to -53,012 last week. We therefore remain SLIGHTLY BEARISH.
 
EURO: The EURO rose comfortably against the USD last week.
Only one item for the EURO this week.
On Monday we have the German Business Climate number thought to be 111.2 from 111.0.
COT data for the Euro shows that large commercials substantially decreased their net long position from +37,613 to +16,094 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH.
 
GBP: The GBP closed very slightly higher against the USD last week.
Only one item for the GBP which is the Current Account number on Friday expected to be -16.3B from -25.5B.
COT data shows that large commercials substantially slightly decreased their net long position from +122,119 to -119,871 last week. This remains close to a 52 week high and we therefore remain BULLISH.
 
YEN: The YEN rose reasonably against the USD last week.
There is one item for the YEN this week.
On Thursday we have Household Spending which is anticipated to fall from -1.2% to -1.6%.
COT data shows that large commercials slightly decreased their net long position from +99,742 to +89,475 last week. We therefore remain BULLISH.
 
AUD: The AUD fell strongly against the USD last week.
There is no data for the AUD this week.

COT data shows that large commercials increased their net short position from -45,488 to -55,683. This is close to a 52 week extreme We therefore alter our view from SLIGHTLY BEARISH to BEARISH.
 
CNY: Two items for the CNY this week.
On Thursday we have both manufacturing PMI and Non-Manufacturing PMI. The former is expected to rise from 51.6 to 51.7.
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 strongly last week. Large commercials substantially decreased their net short position from -163,933 to -76,170 last week. We therefore alter our view from VERY BEARISH to BEARISH.
RUSSELL2000: The RUSSELL2000 fell reasonably last week. Large commercials increased their net long position from +19,416 to +39,779 last week. We therefore remain NEUTRAL.
NASDAQ100: The NASDAQ100 fell marginally last week. Large commercials increased their net short position from -76,105 to -81,287 to - last week. We therefore remain SLIGHTLY BEARISH.
 
COMMODITIES:
GOLD: GOLD rose well last week. Large commercials slightly increased their net short position from -123,287 to -128,997 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 strongly last week. Large commercials slightly decreased their net short position from -97,999 to -93,734 last week. We therefore remain BEARISH.
COPPER: COPPER fell strongly last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercial slightly decreased their net short position from -26,618 to -25,857 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 fell very marginally last week. Large commercials slightly decreased their net short position from -447,406 to -433,437 last week. We therefore remain VERY BEARISH.
 
The gold:silver ratio slightly decreased from 70.74 to 70.10 indicating very marginal silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND rose very strongly last week. Large commercials slightly decreased their net long position from +99,537 to +86,069 last week. This remains close to a 52 week extreme and we therefore remain BULLISH.

OTHER FX:
CAN$: The CAN$ fell very marginally last week. Large commercials meaningfully decreased their net short position from -12,786 and are now net long +32,464 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
NZD: The NZD rose marginally last week. Large commercials increased their net long position from +5,403 to +13,500 last week. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
AUD/YEN: Even though there is no COT data for this pair we will base our recommendation by analyzing both individual currency COTS and thereby creating a hybrid COT. COT for the AUD slightly improved and slightly worsened for the YEN. We therefore alter our view from NEUTRAL to SLIGHTLY BEARISH for the AUD.

THOUGHTS FOR NEXT WEEK
The USD continues to fail to make new highs
This bodes well for precious metals in the medium to long term
COT changes this week reflect this as improvements in the commodity currencies indicate
The 30 YEAR BOND continues to point to risk weakness.
 
Therefore our recommendations for next week are:
Continue accumulating gold slowly on weakness
Sell risk outright
But the commodity backed currencies
Buy the 30 YEAR BOND on any weakness.
 
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