Week to Jan 26th

On Monday the US Government shutdown was averted, and indices continued their upward trajectory, the SPX setting another all-time high. NKY and DAX followed suit enthusiastically, FTSE less so, hampered by sterling’s surprising strength in the continuing absence of bad Brexit news. Conversely, USD continued it’s downward path, with DXY shedding 0.2%., as EUR gained on progress in the German coalition. The greenback was down against all currencies except JPY, and Gold was down in line. Oil was up slightly, as was the US 10-year bond yield, which added 2bp after touching 2.672%, the highest rate in three and a half years. After the close, NFLX beat estimates and the stock went up over 10%.

Tuesday was relatively flat for indices, although that didn’t stop SPX advancing slightly (0.9%) to post another ATH. NDX was up a healthier 0.51% (to a new high) on the back of the NFLX results. Despite the raft of Germany and Eurozone Sentiment beats, DAX remained flat, as did FTSE and NKY, although the latter made a new intraday high in the Asian session. DXY manage to shed nearly 1%; virtually all other currencies (and Gold) were up, the only laggard being AUD which failed to recover fully from an dip in the Asian session. The BoJ rate decision at 0400 brought brief volatility on both directions, and then JPY continued to appreciate all day. Bond yields followed downward, and Oil was up in line.

Wednesday was a down day in the Asian session with NKY, and this continued in Europe after PMI misses for Germany (0855) and Eurozone (0900) with DAX and FTSE falling sharply. However, despite the risk-off signs of Gold and JPY both up, nothing can stop the US juggernaut, and SPX stayed flat but DJIA eked out another all-time high. TreasSec Mnuchin’s comments about being unconcerned about a weaker dollar continued to drive DXY down another 1%, and all other currencies appreciated substantially, as did Oil. Sterling was particularly strong, up 1.5% above $1.42 for the first time since the Brexit vote. Bonds yields were up 3bp, reversing the previous day’s losses.

The minor story on Thursday was another all-time high on SPX and DJIA, but for a third day, minor movement. The pressure on other indices this week is balancing the US (irrational?) exuberance. DAX, NKY and FTSE all fell. This US pricing is all momentum now, the indices barely react to news. The huge surprise of the day was, who else, President Trump at Davos who said at 1900 “the dollar is going to get stronger and stronger and ultimately I want to see a strong dollar”, effectively contradicting his TreasSec's remarks a day before. DXY immediately put on 1% and all currencies (and Gold and Oil) fell against USD for the day. Interestingly, bond yields had preceded the statement, peaking at 2.677% around 1500. After the yields receded, and ended down on the day, not reacting to the Trump remarks.

Prior to this, EUR had hit another three-year high of 1.2538 following the hawkish ECB press conference, where President Draghi ascribed the strength of the euro to external factors (ie the collapse of USD), and by implication, was not concerned, unlike last year when the single currency retreated from 1.20 after ECB concerns about the level. Also GBP touched a new intraday high of 1.4350. Cable is now back in the territory it occupied in H1/2016, when the UK polls predicted a Remain victory, or indeed the price the week before the Brexit vote. The Canadian Retail Sales print was a miss, but hardly any effect was seen.

Friday saw something we have seen every week this year (ie three times before) a strong closing rally in SPX and DJIA, and this week all the other indices followed suit. All three US indices ignored the normally significant GDP miss, and posted all-time highs again, with NDX breaching the psychological 7,000 roundpoint for the first time. The rally was repeated elsewhere with NKY, DAX and FTSE also up, the latter being particularly strong, posting its best day of 2018, up nearly 1%.

The Trump dollar effect was very short-lived, and USD continued to fall, erasing the 1% gain from the previous day. Canada missed on monthly CPI at 1330 causing a brief dip of 0.49%, which was quickly recovered, and all currencies ended up on the day, the standout being AUD (despite Australia being closed) which posted a 1% gain, and touched 0.8135, a level not seen since May 2015. Gold was slightly up, in line, as was Oil, and yields were sharply up (4bp) touching a fresh 9-year high of 2.13%.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover, with USD pulling back for a seventh week, against all currencies, more sharply than in previous weeks. the best forex trade would have been to buy cable, up 2.27%. The top index and overall performer was DAX.

At the time of writing, Bitcoin was priced around $11,000, down 4% on the week as the Rodrigue bubble fractal plays out, and volatility reduces.

AUDUSD 0.8108 (+1.55%)

EURGBP 0.8776 (-0.44%)

EURUSD 1.2429 (+1.76%)

GBPUSD 1.4163 (+2.27%)

NZDUSD 0.7358 (+1.15%)

USDCAD 1.2314 (-1.46%)

USDJPY 108.59 (-2.00%)

DAX     13389 (-0.56%)

FTSE     7640 (-1.25%)

NIFTY   11064 (+1.56%)

NKY     23731 (-0.47%)

SPX    2874.1 (+2.27%)

GOLD  1350.66 (+1.43%)

OIL     66.24 (+4.36%)

NEXT WEEK (all times are GMT)

A busy week, with both scheduled and unscheduled news. The Trump Mueller investigation is back in the news, and traders are still pondering Trump’s “stronger dollar” remarks. Speculation about the Fed vice chair position may also feature. And of course it’s US rate decision and NFP in the same week.

A press conference is expected on Monday after NAFTA negotiations conclude. CommSec Ross said last week at Davos that he expected “a good chance” of success. China’s National People’s Congress Standing Committee discuss changes to the constitution. The main news of the day is US Personal Consumption Expenditure, an inflation proxy.

The main news on Tuesday comes from Europe with German inflation and Eurozone GDP, and BoE Governor Carney speaking to the UK Parliament. President Trump’s State of the Union address is at 2100 after markets close. NZ Finance Minister Robertson speaks at 2130.

Wednesday sees Australian and Eurozone inflation prints, but the big news is the FOMC rate decision. The CME Fedwatch consensus is 96.4% for a hold, so no real surprises are expected, but inevitably there will be dollar volatility following the release of the FOMC minutes, and the dot-plot forecast. We will be publishing our fractals as usual. Don’t forget also the ADP Payrolls figure, an indicator to NFP. The estimate (at 180k) is in line with the NFP estimate, so a strong variance may well move the dollar. It ought to move SPX as well, but as you know, the index seems immune to news these days. We also have Canada GDP 15 minutes after ADP, another potential flashpoint for USDCAD. Also speaking today is BoJ Iwata (dove) at 0130. Look for end of month rebalancing signs as the day goes on. We expect high volatility in NQ (NDX futures) after the US bell as FB, and MSFT report (they total 14.66% of NDX by weight). Also reporting is  BA, the largest (at 8.88%) component of DJIA. Every 1% move in Boeing causes a 23.6 point move in the Dow.

Thursday starts the new month. The calendar for the day is all PMIs, but the only important one is the ISM print at 1500. It separates out prices paid, which is, to an extent, a forward indicator for inflation. Action on the day is more likely to be driven by how traders read the Fed report, and then as the US session progresses, all eyes will again be on NDX and NQ_F in anticipation of heavyweights AAPL, GOOG, AMZN all reporting after the bell. Between them these three make up 28.87% of NDX, so volatility is assured. BABA also reports. Surprisingly, this stock is not in NDX.

Friday of course is NFP day. As usual, if the print is close to the estimate, traders will be looking at unemployment and average hourly earnings, which may include the ‘Trump tax Christmas bonuses’ although arguably some of that money may not flow through until February. In recent months, markets have paid less attention to NFP, but who knows, the effect must surely return at some time. Note that Canada’s NFP is non-synchronous this month (ie it is released a week later), depriving us of the volatile USDCAD play. To end the week, SF Fed President Williams speaks at 2030.

CALENDAR (all times are GMT). High volatility items are in bold

Mon Jan 29

0000 AUD Australian New Home Sales

1330 USD US PCE YoY (inflation proxy) (est 1.6% prev 1.5%)

1530 USD Dallas Fed Manuf Business Index

2145 NZD Trade Balance/Imports/Exports

2330 JPY Japan Jobs/Unemployment

2330 JPY Japan Overall Household Spending (inflation proxy)

2350 JPY Japan Large Retailer Sales/Retail Trade

Tue Jan 30

0900 EUR Germany CPI (prev 1.6%)

0930 GBP UK Consumer Credit/Mortgage Approvals

1000 EUR Eurozone GDP (est 2.6% prev 2.6%)

1000 EUR Eurozone Sentiment Indicators

1400 USD S&P/Case-Shiller US Home Price Indices

1530 GBP BoE Governor Carney speaks

2130 WTI API Stock

Wed Jan 31

0001 GBP UK Gfk Consumer Confidence

0030 AUD Australia CPI (est 1.7% prev 1.8%)

0100 CNY China PMIs

0200 USD President Trump speaks

0700 EUR Germany Retail Sales

0900 EUR Germany Unemployment

1000 EUR Eurozone Unemployment

1000 EUR Eurozone CPI (est 1.3% prev 1.4%)

1315 USD US ADP Payrolls (est 180k prev 250k)

1330 CAD Canada GDP MoM

1445 USD Chicago PMIs

1500 USD US Pending Home Sales

1530 WTI EIA Stock (est -2.00M prev -1.07M)

1900 USD Fed Rate Decision & MPC (est hold 1.5%)

2230 AUD Australia AIG Performance of Manuf Index

2350 JPY Japan FDI

Thu Feb 01

0245 CNY China Caixin Manuf PMI

0855 EUR Germany Markit Manuf PMI

0900 EUR Eurozone Markit Manuf PMI

0930 GBP UK Markit Manuf PMI

1330 USD US Jobless Claims/Productiivity/Labor Costs

1430 CAD Canada Markit Manuf PMI

1445 USD US Markit Manuf PMI

1500 USD ISM Manuf PMI/Prices Paid

1500 USD US Construction Spending

2145 NZD NZ Building Permits

Fri Feb 02

0930 GBP UK Construction PMI

1000 EUR Eurozone PPI

1330 USD NFP/Unemployment/Participation/AHE/AWH

1500 USD Factory Orders

1800 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here.

Week to Jan 19th

US Markets were closed on Monday for Martin Luther King’s Birthday, but it didn’t stop SPX futures from gapping up, and then making another all-time high. The mood was not however shared elsewhere as NKY and DAX were flat, and FTSE was slightly down, reacting to GBP adding to Friday’s huge 2-cent gain, touching $1.38 for the first time since Brexit. USD was sharply down again, with DXY closing at a three-year low of $90.45, and all currencies, Gold and Oil were up in line, the latter making another three-year high. US 10-year bond yields spiked up briefly but closed the day flat.

Tuesday was a rare down day in the US markets. After an initial further intraday high, mainly pre-session, which saw the DJIA push through 26,000 for the first time, before falling 1.45% (SPX fell 1.40%) during the cash period. It is possible that this was on government shutdown concerns, although with SPX and DJIA so overbought, it is difficult to say. DAX and FTSE fell in line, as did NKY although a strong performance in the Asian session meant the Japanese index ended the day flat.

For once DXY was slightly up (as were bond yields), due to slight gains against CAD and EUR, and small losses against GBP and JPY. AUD was flat. Gold spiked briefly as equities fell, but ended the day down as did Oil.

The stock rally continued on Wednesday, erasing Tuesday’s losses and SPX and DJIA made new record closing highs and new roundpoints of 2,800 and 26,000 respectively. It was less than two weeks ago that the DJIA passed 25,000, making this the fastest 1,000 points in history. NKY followed suit almost exactly (the index is back to tracking USDJPY this week), but DAX and FTSE were flat on the day.

As we mentioned last week, SPX closed the longest ever run without a 5% correction both in time (397 days) and distance (41.15$), notably with both records being completed on the same day.

Following the 3bp rise of the US 2-year note to a nine-year high (and a matching 3bp rise in the 10-year note which we track), the dollar had its best day since Oct 26th, with DXY putting on 48c (0.53%), with EUR, JPY and Gold sharply down, despite the Eurozone CPI beat at 1000. The only exception was GBP which continued to rally in the absence of any bad Brexit news, touching $1.39 briefly before falling back to end the day only slightly up, as was AUD. At 1500, The BoC raised rates to 1.25% as expected, but this was clearly priced in. The price action was unusual. There was an instantaneous 40 pip (0.33%) spike up, then followed by a huge 169 pip (1.37%) move down, all in a minute. The market then retraced all but 10 pips of that move over three hours, and then slowly moved back to where it started to end the day flat. Oil was up recovering some of Tuesday’s losses.

Despite the China GDP beat at 0200, Thursday was another down day for equities in this see-saw week, as the shutdown grew closer, with only DAX up, reacting to the previous day’s downturn in EUR. Bond yields up were 4bp, the highest since March, and Gold was down, but this didn’t help DXY, which posted another red candle, down against all major currencies. Oil was also down on the day, retreating further from Monday’s high.

The theme of the week continued on Friday, SPX changed direction again and closed at another all-time high, completely disregarding the government shutdown. FTSE also had its first green day of the week, as GBP retreated from $1.39, and Oil turned back up. DAX had its best day since Oct 26th (the same day as Wednesday’s previous dollar record), putting on just over 1% to make a two-month high. Only NKY was down on the day as JPY recovered.

It was another good day for bond yields and USD. Yields posted another three year high, closing at 2.664%. DXY was up again, although still posting its fifth down week in a row.  CAD fell particularly sharply, giving up 95 pips (0.77%) finally picking up on the Oil slide, and from comments from the Russian Oil Minister that the price was unlikely to exceed $60 medium-term. EUR, GBP and AUD (along with Gold) were down. Oil duly slid as well. Only JPY managed gains against the dollar.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover, with USD pulling back for a sixth week. As last week, the only currency to recede against the dollar was CAD, so the best forex trade would have been to buy GBPCAD, up 1.06%. The top index and overall performer was DAX.

As of Saturday morning, Bitcoin was down 7.4%, at $12,650, after a very bad week where it fell 33% at one point to just above $9,000. 

AUDUSD 0.7984 (+0.88%)

EURGBP 0.8815 (-0.74%)

EURUSD 1.2214 (+0.09%)

GBPUSD 1.3849 (+0.89%)

NZDUSD 0.7274 (+0.29%)

USDCAD 1.2496 (+0.33%)

USDJPY 110.81 (-0.17%)

DAX     13464 (+1.65%)

FTSE     7737 (+0.23%)

NIFTY   10894 (+1.99%)

NKY     23842 (+0.06%)

SPX    2810.3 (+0.77%)

GOLD  1331.67 (-0.49%)

OIL     63.47 (-1.44%)

NEXT WEEK (all times are GMT)

The US Government Shutdown has happened this weekend, and will undoubtedly be a factor in the markets next week, although the impact should not be serious, as shown in our fractal. On Sunday, Germany’s SPD will vote on whether to enter formal coalition talks with Angela Merkel’s CDU/CSU, and the next round of NAFTA talks starts early. We are also now seriously into the Q4/17 earning calendar.

Monday is light on data, and we expect most talk to be around the shutdown and NAFTA. Netflix report earnings after the bell.

Tuesday sees the BoJ rate decision. A hold is expected, but traders will be looking for further hawkish comments following the recent tightening decision. The Davos conference starts in Switzerland, and Canadian PM Trudeau speaks at 1030. There are no significant US news releases.

Wednesday has a raft of PMIs, with Markit reporting Manufacturing and Services on the same day for Germany and the US. Also of interest are UK average earnings, the failure of which to grow has been a drag on interest rates. A miss here could push the overbought pound down quite sharply. South African inflation is released at 0800.

Thursday has a raft of speakers in Davos: Christine Lagarde, head of the IMF; US TreasSec Mnuchin, UK PM Theresa May, and an interesting appearance from US economist Robert Shiller (he of the Cyclically Adjusted PE Ratio) in a session called “The Crypto Asset Bubble”. Elsewhere in Europe it’s a big day with the ECB Rate Decision at 1245 but more importantly the press conference at 1330, where traders will be watching Presidential Draghi for remarks about whether QE will definitely end in September 2018, and even if he reconciles the fact that the ECB thought EUR was high at 1.20 last September, but hasn’t commented on the fact that it stands around 1.22 now. Canadian Retail Sales are reported at 1330. The estimate is very low, and a beat could show a renewed bout of volatility. The Brazil market is closed.

Friday opens with President Trump’s special address at 0700 in Davos, although no surprises are expected, and it is thought the theme will just be more ‘America First’ rhetoric. The main data highlight is US GDP/PCE, but Canadian CPI, issued at the same time produces another USDCAD volatility point. The first round of the Czech elections is held. Markets are closed in Australia (Australia Day) and India (Republic Day).

CALENDAR (all times are GMT). High volatility items are in bold

Mon Jan 22

1330 USD Chicago Fed National Activity Index

Tue Jan 23

0400 JPY BoJ Rate Decision (est hold -0.1%)

0930 GPB UK PSBR

1000 EUR Eurozone ZEW Sentiment

1000 EUR Germany ZEW Sentiment/Current Situation

1500 EUR Eurozone Consumer Confidence

2135 WTI API Stock

2350 JPY Japan Trade Balance/Imports/Exports

Wed Jan 24

0000 EUR Eurogroup Meeting

0500 JPY Japan Economic/Coincident Indices

0855 EUR Germany Markit Manuf/Services/Composite PMIs

0900 EUR Eurozone Markit Services/Composite PMIs

0930 GBP UK Unemployment/Average Earnings

1400 USD US Housing Price Index

1445 USD US Markit Manuf/Services/Composite PMIs

1530 WTI EIA Stock

2145 NZD NZ CPI

2350 JPY Japan FDI

Thu Jan 25

0700 EUR Germany Gfk Consumer Confidence

0900 EUR Germany IFO Business Climate/Expectations

1245 EUR ECB Rate Decision (est hold 0.0%)

1330 EUR ECB Press Conference

1330 USD Jobless Claims

1330 CAD Canada Retail Sales MoM (est -0.1% prev 1.5%)

1500 USD New Home Sales

2330 JPY Japan CPI

2350 JPY BoJ MPC Minutes

Fri Jan 26

0930 GBP UK GDP

1330 USD US GDP (est 3.0% prev 3.2%)

1330 USD US Durable Goods

1330 CAD Canada CPI
1800 WTI Baker Hughes Rig Count

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Week to Jan 12th

This week we had the usual all-time highs, but for the first time for a long time, the story of the week was fixed income.

There seems no end (a figure of speech, not a prediction!) to the equities rally, as on Monday, SPX made another all-time intraday and closing high, and the Euro Stoxx 600 finished just under 400, a price not seen since August 2015, and DAX was up. NKY futures (Japan was closed again) made a new high for this century. Only FTSE failed to join the party, closing slightly down after some GBP appreciation, the only currency to gain against the dollar. EUR was down 0.6%, pulling back from the psychological 1.20 roundpoint, despite beats on the Eurozone sentiment indicators and Retail Sales at 1000. Other currencies were broadly flat, as was Gold. Oil advanced slightly, with, as you can see, no inter market effect. US 10-year Bond yields continued their advance from last week.

The big story on Tuesday was not scheduled and from an unexpected corner. The BoJ made a surprise announcement that they were scaling back their monthly bond purchases (QE), which immediately advanced JPY by 0.57%, and by 0.71% during the next 24 hours. NKY fell in line. DAX put in a flat day as EUR continued to fall, and FTSE and GBP had a Turnaround Tuesday, the index recovering Monday’s losses, just as the currency gave up its gains.

The BoJ move sparked speculation amongst traders that if conservative Japan was suddenly tapering, then the US might accelerate their tightening programmes and rate hikes. US Bond yields were therefore sharply up by 7bp to a 10-month high. The German Bund and the UK 10-year gilt yields rose 3bp and 4bp respectively, and EURJPY and GBPJPY fell 0.7% and 0.6% respectively, which is more than the USDJPY decline of 0.4%, so the net effect was that USD was up against all currencies except JPY itself. Gold was down in line with the USD position. Oil advanced sharply by 1.5 cents (2.54%) to post a marubozu candlestick. As the strong API stock beat came at 2130, after the pit closes, one can only assume that traders were anticipating it, or possibly it was a consequence of the  bullish Japanese outlook. (Japan imports 85% of its energy resources, and is the largest importer in the world after China).

None of this affected equities other than NKY. SPX, DJIA, NDX and FTSE all made all time highs, and DAX was up again touching a two-month high.

You wait ages for a surprise central bank reduced bond buying announcement from Asia, then two come along at once. At 1030 on Wednesday, the rumor on the wires was that Chinese officials were recommending slowing or halting the buying of US Treasuries. The effect was instant. Yields put 4bp immediately (that’s a 0.41% drop in the bond, the kind of move you get at FOMC or NFP on USD), and DXY dropped 0.52%. Gold shot up as well. Without any official confirmation, the bond price fully recovered, but DXY ended down.

This was also do to with rhe fallout from Tuesday’s BoJ announcement. Unlike GBP, JPY did not fade the China spike but carried on rising all day. A great demonstration of the difference between Japan and China. One is tapering their own bonds, the other is tapering USD bonds.

The next surprise of the day was a report from Reuters suggesting that Canada was increasingly convinced that President Trump will withdraw from NAFTA. The release, at 19:07 caused an immediate 95 pip drop in CAD, which largely held into the next day. 

The overall effect for the day was that USD was down against all currencies except GBP. Oil had a very flat day, only moving 2 cents, despite the EIA beat at 1530 (which was less than the API beat the day before).

Also we saw the equity advance take a rest, perhaps on the vote of no confidence from China. SPX was flat, NKY was sharply down in line with USDJPY, DAX was similarly sharply down, as EUR stayed up. In a reverse of Monday, FTSE was up as GBP was down on the day.

The equity rally resumed in earnest on Thursday, and SPX, DJIA and IXIC (COMPQ, the Nasdaq All-Share, not the Tech 100), and FTSE all touched all-time highs again. DAX fell because of a sharp rise in EUR after the ECB minutes suggested that QE will end in September without any taper, an outcome we highlighted last week.

EUR put on 83 pips (0.70%) on the ECB statement, JPY continued up from Tuesday’s BoJ announcement, but in any event, all the other currencies were up, helped by beats on Australia Retail Sales at 0030, Japan Leading Economic Index at 0500, and Eurozone Industrial Production, and a miss on US PPI and Initial Jobless Claims at 1330.

China announced that Wednesday’s rumor was ‘fake news’, but this did nothing to help DXY (still falling) or yields (flat on the day). Gold was also up. Oil had a brief rally to $64.77, a three year high, before fading to end the day flat. 

Friday’s important news was US Retail Sales and inflation, both at 1330. But they both came in as estimated, with only the ‘ex food and energy’ CPI making a the smallest (0.1%) of beats. So it wasn’t important. But anyway, it didn’t matter. Once again SPX, DJIA, IXIC and FTSE all made record intraday and closing highs, and posted near-perfect marubozu candles (the open is the low, the close is the high). We must remember that FTSE is to some extent an oil proxy, so some of these gains come from the strong rally in oil, whether or not GBP moves. Despite the EUR ramp, DAX managed to stay flat, which was a good result in the circumstances.

DXY had its worst day since June 27th, and fell 0.96% to finish at 90.90, the lowest for three years. EUR breached $1.22 to hit a three year high as Angela Merkel announced a coalition deal, GBP hit a post-Brexit high amid hopes for a ‘soft’ version. However, this was only part of it as AUD was up 0.29%  after dipping on China’s miss on non-CNY imports (the only miss in a raft of beats), and CAD was up 0.51%, in line with Oil, and despite NAFTA concerns and an increased Rig Count (bearish for Oil) at 1800. The weak dollar helped Gold shoot up $16 to a four-month high, continuing the curious dual rally of stocks and Gold.

Next Monday is Martin Luther King’s birthday, a holiday in the US. US Futures, and all other markets are open as normal.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover, with USD pulling back for a fifth week. The only currency to recede against the dollar was CAD, so the best forex trade would have been to sell CADJPY, down 2.18%. The top index was SPX, and overall, once again Oil, up 4.73%

Bitcoin gave up last week’s gains, and was down 12.78% to finish roughly where it was at Christmas.

AUDUSD 0.7914 (+0.70%)

EURGBP 0.8881 (+0.20%)

EURUSD 1.2203 (+1.46%)

GBPUSD 1.3727 (+1.20%)

NZDUSD 0.7253 (+1.19%)

USDCAD 1.2455 (+0.35%)

USDJPY 111.00 (-1.79%)

DAX     13245 (-0.68%)

FTSE     7719 (+0.78%)

NIFTY   10681 (+1.16%)

NKY     23827 (+0.10%)

SPX    2788.9 (+1.70%)

GOLD  1338.23 (+1.36%)

OIL     64.40 (+4.73%)

NEXT WEEK (all times are GMT)

Monday is Martin Luther King Day, a holiday in the US, although European and Asian markets are open. BoJ Governor Kuroda speaks. Interest in Japan is heightened now they are engaged in a program of tightening. New BoE member Tenreyro (neutral) speaks in London at 1815.

Tuesday sees UK inflation, and also the Brexit (EU Withdrawal) bill returns for Report Stage in the UK House of Commons. The CPI estimate of 3.2% would be a new five-and-a-half year record. We also get a rare speech from the Swiss National Bank.

Wednesday is the main event, the BoC Rate Decision. A 25bp hike is expected, so expect CAD to move sharply whether we get it or not. The markets have started to price this in following the excellent jobs reports, but NAFTA looms on the horizon. Elsewhere we have Eurozone CPI, not normally a market mover, as the individual countries have already reported, and some speeches:ECB Nowotny (hawkish) at 0855, BoE Saunders (hawkish) at 1145, FOMC Evans (dovish, non-voter at 2000, Mester (hawkish, voter) at 2130.

If SPX does not fall below 2705 at the Wednesday close (which is unlikely), it will, at 395 trading days, make the longest run without a 3% drop in history, the most recent and previous record being the 394 day run from Dec 21, 1994 to Jul 12, 1996. The market rose 40.6% in that period. SPX needs to hit 2800 (only 11 handles away) to beat the gain record as well.

The main news on Thursday comes in the Asian session with Chinese Retail Sales, and the Australian version of NFP. After a standout print last month of 61.6k, this month’s estimate of 24.9k is moderate, but is still equivalent to 333k in US terms, a figure not seen in the US for years. (The US has 13.4 times the population of Australia). Canada has recently surprised with conservative estimates and then strong beats, and it is interested to see if Australia is going the same way.

President Trump will on the stump supporting Republican Rick Saccone in the Mar 13 Pennsylvania election. Trump won this district by over 20% in the election. Bundesbank President Weidmann opens the IMF/Bundesbank joint event on German economic policy, and ECB Coeure speaks there at 1430. Finally, there is the new Canadian ADP report, although as this follows the official jobs report last week rather than preceding it, the effect is very little. The Central Bank of Turkey make a rate decision at 1100.

The short week finishes quietly on Friday on the economic release front. However it is once again the US government shutdown deadline. This has been deferred twice. The sticking point is the immigration (DACA and the ‘wall’). However, the Democrats will not want to take the blame, given the proximity of mid-term elections. Watch this space!

CALENDAR (all times are GMT). High volatility items are in bold

Mon Jan 15

0200 CNY China FDI

1000 EUR Eurozone Trade Balance

2145 NZD Retail Sales

2200 NZIER Business Confidence

Tue Jan 16

0930 GBP UK CPI/PPI

1400 NZD GDT Milk Auction (time approx)

1700 CHF SNB Chairman Jordan speaks

2350 JPY Japan Machinery Orders

Wed Jan 17

0030 AUD Australia Homes Loans/Investment Lending

1000 EUR Eurozone CPI

1415 USD US Industrial Production/Capacity Utilisation

1500 CAD BoC Rate Decision (est 1.25% prev 1.00%)
1500 USD US NAHB Housing Market Index

1615 CAD BoC Press Conference

1900 USD Fed Beige Book

2130 USD FOMC Mester speaks

2130 WTI API Stock

2330 AUD Australian Westpac Consumer Confidence

2350 JPY Japan FDI

Thu Jan 18

0000 AUD Australian HIA New Home Sales

0001 GBP UK RICS Housing Price Balance

0030 AUD Australia Employment/Unemployment

0200 CNY China Retail Sales/Ind Production

0200 CNY China GDP

0815 EUR Germany BuBa Pres Weidmann speaks

1330 USD US Building Permits/Housing Starts

1330 USD US Jobless Claims

1330 USD US Philly Fed Manuf Survey

1330 CAD ADP Payrolls

2130 NZD Business NZ PMI

Fri Jan 19

0700 EUR Germany PPI

0930 GBP UK Retail Sales

1800 WTI Baker Hughes Rig Count

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here.

Week to Jan 5th

Monday was New Year’s Day, the only day of the year when all markets are closed.

The New Year opened on Tuesday, and saw the SPX rally resume (and IXIC finally post a close above 7,000) after the PMI beat at 1445, although the reaction was not shared elsewhere. DAX and FTSE both suffered from an opening pullback as their respective currencies EUR and GBP soared (despite PMI misses in Germany and the UK), although FTSE briefly notched up a new all-time high at the open. A similar effect was seen in NKY (futures only - Japan was closed) but all closed lower. In currencies the theme was dollar weakness across the board, as EUR touched a four-month high. Gold fell in the Asian session, but was up 1.1% at the close to a three-month high, and Oil continued its December rally, touching a new 19-month high, although it ended the day flat. US 10-year bond yields were up on inflation expectations.  

Europe’s DAX and FTSE joined in the equities rally on Wednesday, helped by a turnaround in GBP and EUR which gave up Tuesday’s gains, and a beat in German Unemployment at 0900. SPX and NKY (futures - Japan closed again) continued to rally, both making new highs, all helped by the beats in ISM Manuf PMI and ISM Prices Paid, the latter being particularly strong at 69.0 vs 65.0. NDX, DJIA and SPX all posted new all-time highs.

It was a rare positive day for the dollar, with DXY putting on 0.39%, both before and after the FOMC minutes. Only AUD (not part of DXY) was up. Gold was down in line, as were bond yields. Oil was sharply up (2.65%) on worries about the tensions in Iran, and correctly anticipating the API Oil stock beat at 2130.

Another day, another all-time high. On Thursday DJIA broke straight through the psychological 25,000 barrier for the first time after the strong beat on ADP payrolls at 1315 (250k vs 190k estimate). NKY had already rallied on the first cash day of the year for Japan, and again DAX and FTSE joined in.

The downward trend resumed in USD, with Gold and all other currencies rising against it. EUR was particularly strong (up 0.5%), making a new 4-month high, as was NZD, up 0.89% after the previous day’s positive milk auction report (which is published during the NZ night). Gold was up and yields were down. Oil held onto Wednesday’s gains with the EIA stock beat, posting a flat day.

Friday started with another 100 points on NKY, and the mood continued with DAX rising as the Eurozone inflation report beat expectations. The big story of the day was of course the dual NFP print. The US missed (148k vs 189k), but the Canadian result was stellar at 79.5k vs downward revised estimate of 1k). This is equivalent to 715k in the US, as the USA has nine times the population of Canada. To top this, Canada beat on unemployment whereas the US figure came in as expected. You will remember that last week, we suggested a USDCAD move in short order to 1.2470. In the event, the pair smashed through this figure to drop 152 pips (1.22%) touching a 3-month low of 1.2355. The other US/Canada pairs, the Trade Balance and PMIs were both misses, and so had little effect on USDCAD.

SPX and the other US indices shrugged off the NFP miss and accelerated even faster than earlier in the week to make another set of all-time highs. You would think it was a beat, as USD also did well, and despite the CAD blowout, DXY  managed to post a small (0.16%) green candle for the day. (CAD is 9.1% of DXY), as the other DXY currencies were down, unlike non-components AUD and NZD which were up again. Gold was slightly down, and yields were slightly up, recovering to the Thursday intra-day high. Oil gave up a little of Wednesday’s ramp but was still comfortably up on the week.

WEEKLY PRICE MOVEMENT

These are the prices movements for the week on the instruments we cover, with USD pulling back for a fourth week. With the contrast in the Canadian and US jobs reports, selling USDCAD was the best forex trade (or, again, Gold if you count that as forex). Indices were all very strong, with NKY being the best 4.56% up. Bitcoin recovered well, putting on 18.3% in the week.

AUDUSD 0.7859 (+0.74%)

EURGBP 0.8863 (-0.17%)

EURUSD 1.2027 (+0.19%)

GBPUSD 1.3564 (+0.44%)

NZDUSD 0.7168 (+1.06%)

USDCAD 1.2411 (-1.34%)

USDJPY 113.02 (+0.33%)

DAX     13336 (+3.74%)

FTSE     7659 (+0.14%)

NIFTY   10559 (+0.28%)

NKY     23803 (+4.56%)

SPX    2742.1 (+2.63%)

GOLD  1320.32 (+1.35%)

OIL     61.49 (+2.31%)

NEXT WEEK (all times are GMT)

Over the weekend, President Trump is at Camp David with GOP leader McConnell and Speaker Ryan to plan this year’s legislative agenda. AG Sessions is not invited. Angela Merkel and her party are holding coalition talks with the SPD. There are two Fed speakers, Mester at 1515 Saturday and Williams at 1300 Sunday. Both are voters and slight hawks. We are back to normal now, and forex and futures open on Sunday evening at 2100 and 2300 as usual.

Monday has several Eurozone forward sentiment indicators, and the BoC Business Outlook. With CAD at extremes, this is one to watch. More Fedspeak from Bostic (voter, neutral) at 1740, Williams (voter, hawkish) at 1835 and Rosengren (voter, hawkish) at 2100.

Tuesday has the ECB non-MPC minutes. These are not normally important but are always marked as high volatility in case something unexpected is reported. Last time the euro was above 1.20, the ECB expressed concern. Look for similar remarks, which will surely drive EUR down. The Swedish inflation print is at 0825, SEK is 4.2% of DXY. Fed Kashkari (dove, non-voter) is speaking.

Wednesday data is mostly in the UK. The trade numbers often beat or miss wildly, and so may move GBP briefly. Swedish Riksbank minutes are released (see comments for Tuesday). Fed Evans (dovish, non-voter) speaks at 1400. A quiet day.

Thursday is a bit busier. The ECB MPC minutes are the main event. Traders will be looking for comments about the EUR level, and of course for further QE unwinding guidance. Remember the absence of comment can also move markets. Australian Retail Sales are expected at 0.4% vs 0.5% last month. A miss on this could put a roadblock on AUD’s recent recovery. Today’s Fed speaker is Dudley (voter, neutral) at 2030. Note that William Dudley is due to retire in mid-2018, so he may be a bit more forthright (as opposed to collegiate) this year. NZ Building Permits is the only significant New Zealand print this week, Traders are looking for an improvement on the very poor -9.6% last month.

Friday has the most important data with both US inflation and Retail Sales at 1330. Remember that inflation is one part of the Fed’s dual mandate (along with employment), so the figure is theoretically as important as NFP. The estimate is 2.2% (1.8% ex Food and Energy), the same as last month. A miss could put the March hike (current estimate of likelihood 67%) in jeopardy and send USD down further. In Europe Bundesbank President Jens Weismann speaks, and voting concludes in the Czech Presidential election.

CALENDAR (all times are GMT). High volatility items are in bold

Sun Jan 07

2230 AUD Australia AIG Perf of Construction Index

Mon Jan 08

0700 EUR Germany Factory Orders

1000 EUR Eurozone Sentiment Indices

1000 EUR Eurozone Retail Sales

1530 CAD BoC Business Outlook Survey

2000 USD Consumer Credit Change

Tue Jan 09

0001 GBP UK BRC Retail Sales

0700 EUR Germany Imports/Exports/Trade Balance

0800 EUR ECB non-MPC minutes

1000 EUR Eurozone Unemployment Rate

1315 CAD Canada Housing Starts

2130 WTI API Stock

Wed Jan 10

0130 CNY China CPI

0930 GBP UK Manuf/Industrial Production

1040 EUR Bund Auction

1300 GBP UK NIESR GDP estimate

1330 USD Import/Export Price Index

1530 WTI EIA Stock

Thu Jan 11

0030 AUD Australia Retail Sales

0500 JPY Japan Coincident/Leading Economic Indices

0930 GBP BoE Credit Conditions Survey

1000 EUR Eurozone Industrial Production

1230 EUR ECB MPC minutes

1330 USD US PPI

1330 USD US Jobless Claims

2145 NZD NZ Building Permits

2350 JPY Japan FDI

Fri Jan 12

0200 CNY China Retail Sales/Trade Balance/Ind Prod/FDI

0500 JPY Eco-Watchers Survey

1200 INR India Inflation

1330 USD US Retail Sales

1330 USD US CPI

1630 EUR BuBa Pres Weidmann speaks

1800 WTI Baker Hughes Rig Count

1900 USD US Monthly Budget

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