Weekly Fundamentals - 02 July 2017

 
THE WEEK AHEAD FUNDAMENTALLY - KEY DATA TO WATCH OUT FOR
 

In conclusion to our report last week we wrote:
“The USD continues to fail to make new highs.
This continues to bode well for precious metals in the medium to long term.
A number of changes in COT readings this week.
COT for precious metals has improved.
COT for both the AUD and NZD have significantly deteriorated.
COT for the 30 YEAR BOND is beginning to look worrying.
 
Therefore our recommendations for next week are:
Cover shorts on precious metals and slowly accumulate on dips
Short both the AUD and NZD. Particularly the NZD.
Risk is to be neither sold nor bought at this stage.
Continue accumulating VIX on any dips towards/below 10.”
 
Now let's see how we fared on our recommendations:
Covering shorts on precious metals may have been premature
Shorting both the AUD and NZD were both totally wrong
Remaining ambivalent towards risk was the right call
Accumulating VIX near 10 was a very good call.
 
Not a good week.
 
Even though America will be closed on Tuesday it is a busy week for the USD culminating in Friday’s NonFarm Payroll data.
We also have the two day G20 meetings which start on Friday.
 
USD:The US$ Index closed sharply lower last week.
We start on Monday with Manufacturing PMI expected to rise slightly from 54.9 to 55.0
On Wednesday we have the FOMC Meeting Minutes.
Thursday sees the release of the usual Unemployment Claims figure expected at 245,000 from the previous 244,000; Non-Manufacturing PMI anticipated to fall from 56.9 to 56.6 and Crude Oil Inventories.
Friday is the big day. Average Hourly Earnings is thought to rise from 0.2% to 0.3%; the NonFarm Payroll number is estimated to be 175,000 from the previous 138,000 and the Unemployment rate should remain at 4.3%.
Finally we have the FED Monetary Policy Report.
COT data shows that large commercials decreased their net short position in the US$ Index -11,297 to -10,534. We therefore remain NEUTRAL.
 
EURO:The EURO closed sharply higher against the USD last week.
There is no data for the EURO this week.
COT data for the Euro shows that large commercials increased their net short position last week from -60,155 to -75,505. We therefore remain BEARISH.
 
GBP:The GBP closed sharply higher against the USD last week.
A busy week for the GBP.
On Monday Manufacturing PMI is expected to fall from 56.7 to 56.4 and the BOE Governor speaks.
On Tuesday we have both Construction and Services PMI. The former is thought to fall from 56.0 to 55.2 and the latter from 53.8 to 53.5.
On Friday we see Manufacturing Production thought to rise from 0.2% to 0.4% and there is a chance that the BOE Governor speaks again.
COT data shows that large commercials slightly increased their net long position from +42,276 to +43,194 last week. This continues to remain near a 52 week extreme so we remain NEUTRAL.
 
YEN:The YEN closed sharply higher against the USD last week.
On Sunday we have both the Manufacturing and Non-Manufacturing Indices. The former is thought to rise from 12 to 15 and the latter from 20 to 24.
COT data shows that large commercials increased their net long position from +68,012 to +82,010 last week. This is a 52 week extreme. We therefore remain BULLISH.
 
AUD:The AUD closed sharply higher 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 -14,197 to -20,451 last week. We therefore remain SLIGHTLY BEARISH.
 
CNY: Only one item for the CNY this week.
On Sunday we expect Manufacturing PMI to rise slightly from 49.6 to 49.9.
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 reasonably last week. Large commercials substantially decreased their net long position from +37,234 to +17,979 last week. We therefore remain SLIGHTLY BULLISH.
RUSSELL2000: The RUSSELL2000 rose very slightly last week. Large commercials increased their net long position from +6,231 to +8,243 last week. We therefore remain NEUTRAL.
NASDAQ100:The NASDAQ100 fell strongly last week. Large commercials decreased their net short position from -78,769 to -53,252 last week. We therefore remain BEARISH.
VIX: VIX rose last week.
Large commercials slightly decreased their protection last week decreasing their net long position from +142,424 to +130,665. This remains very close to a 52 week extreme so remain BULLISH on risk protection and BEARISH on risk.
 
COMMODITIES:
GOLD: GOLD fell sharply last week. Large commercials decreased their net short position from -165,016 to -149,863 last week. Now that large commercials hold a net short position which is lower than 200,000 we remain NEUTRAL.
SILVER: SILVER fell last week. Large commercials decreased their net short position from -58,834 to -50,208 last week. This is a 52 week extreme. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.
COPPER: COPPER rose sharply last week. Copper is an important metal as it is a leading indicator for many commodities. Large commercials slightly increased their net short position from -14,123 to -15,010 last week. Large commercials generally carry a net neutral position. This is no longer a neutral position. We therefore remain SLIGHTLY BEARISH.
CRUDE OIL: CRUDE fell marginally last week. It has now fallen for 6 weeks in a row. Large commercials decreased their net short position from -359,714 to -346,338 last week. We therefore remain SLIGHTLY BEARISH.
 
The gold:silver ratio decreased from 75.34 to -74.73 indicating good silver outperformance last week.

DEBT:
US 30 YEAR BOND: The BOND fell sharply last week. Large commercials decreased their net short from -85,475 to -72,662 last week. We therefore remain BEARISH.
 
OTHER FX:
CAN$: The CAN$ rose strongly against the USD last week. Large commercials substantially decreased their net long position from +85,766 to +47,978 last week. We therefore alter our view from BULLISH to SLIGHTLY BULLISH.
NZD:The NZD rose strongly against the USD last week. The NZD has now risen for 7 weeks in a row. Large commercials increased net short position from -22,739 to -26,325 last week. This remains a 52 week extreme and we therefore remain VERY BEARISH.
AUD/YEN:The AUD rose sharply in this pair. COT data for the AUD showed deterioration for the AUD and an improvement for the YEN last week. This bodes badly for risk in the short term.
 
THOUGHTS FOR NEXT WEEK
The USD continues to fail to make new highs.
This continues to bode well for precious metals in the medium to long term.
COT for precious metals continues to improve.
COT for both the AUD and NZD continue to deteriorate.
 
Our recommendations based on our COT readings for next week are:
Continue accumulating precious metals on dips
Continue selling both the AUD and NZD into any further strength
Begin to become wary of the CAN$
Stay away from risk
The USD Index may be due a corrective bounce.
 
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