Saturday 22 February 2020

Week to Feb 21st

Four-day OpEx week, CV fears still present, Gold rises all week

This Friday, 28 Feb, I will be speaking at 9.30am at the London Trader Show. You can get a free ticket by using the coupon code MATRIXTRADE.

In a shortened OpEx week, in which Apple issued a profit warning because of coronavirus, markets swung wildly on ‘good’ and ‘bad’ reports on the epidemic, rather reminiscent of phases of the trade war. The overall mood was clearly risk-off as haven assets rose all week, and even mighty USD capitulated on Friday, although this was largely due to strong PMIs lifting the euro from its support base.

Next week is expected to be more of the same, with little important news except GDP prints, as February and earnings season draws to a close.

Mon Feb 17
US markets were closed today. US futures and European indices were fairly flat, as often happens on US holidays. Also flat were Gold, Oil and Bond futures. DXY rose slightly, mainly due to a fall in ever-volatile GBP, other currencies also being flat. Japan’s GDP miss saw a small fall in JPY after a big miss in the preliminary Q4 GDP print.

Tuesday February 18
Indices were down today on a profit warning from AAPL lowering their guidance because of coronavirus (CV). Gold was up in line. It was however, a clean sweep day for USD, which rose against all currencies. The big misses in the German Economic Sentiment readings at 10:00 caused sharp drop in EUR. GBP rallied on a drop in the Claimant Count at 0930 and a positive tweet from the new Chancellor of the Exchequer (Finance Minister) shortly afterwards. JPY fell on a big miss on Machinery orders. Oil and bonds were flat on the day.

Wednesday February 19
China’s National Health Commission reported a slowdown in CV cases today, and that was enough to push markets back up, with the FOMC minutes taking SPX, NDX and DAX to new all-time highs, with AAPL adding 1.4% to recover Tuesday’s losses. The dollar was up overall, but like Monday, large due to a GBP fade. EUR, CAD and Gold were up, other currencies down. JPY was sharply down, over 1.5 yen on the day, to make a 9-month high. Oil and yields were up in line with the equity move.

Thursday February 20
More CV negative sentiment returned today, with markets falling hard on the US open, pulling back from the all-time highs. Gold was up in line. However, it was a strong day for the dollar following the Fed minutes, with all currencies down. Bonds were up in line with the equity move, however Oil continued to rise.

Friday February 21
The negative CV mood returned continued today, and this time the dollar finally capitulated. Indices were down across the board, and gold, bonds and yen were up in line. The dollar receded against all currencies, and after the German PMI Manufacturing beat, the euro surged notably, reversing four days of decline to close positively for the week. Oil bucked the trend again, and fell on the day.

The top forex trade this week was to buy CADJPY, which was up 1.83%, our pick EURNZD did well up 1.56%, so we still have a 100% success rate, and 4.16% up after picking pairs for three weeks. This week’s call is to sell the week’s strongest mover CADJPY. I try to pick crosses as they are not affected by dollar moves. All indices fell this week, with risky NDX falling the most. Cryptos also fell after several good weeks, as did FANGs with AAPL faring the worst after their profit warning.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)

  • Quiet news week
  • German, Canadian and US GDP
  • HD closes DJIA earnings
  • End of the month

Monday February 24
Little news today, as we start the final week of February. It will be interesting to see if the German business confidence matches last weeks PMIs. Fed Mester (hawk, voter) speaks today. There is a rate decision in Israel. Markets are closed today and tomorrow in Brazil for Carnival.

21:45 NZD NZ Retail Sales (Sun)
02:30 CNY China Retail Sales/Ind Production (time approx.)
09:00 EUR Germany IFO Business Climate/Expectations
13:30 USD Chicago Fed National Activity Index

Tuesday February 25
The most important news today is the German GDP. The retail phase of earnings season continues with HD and M reporting before the bell. There is an important EU/UK meeting to discuss the Brexit framework. There is a rate decision in Hungary.

07:00 EUR Germany 19Q4 final GDP (QoQ e0.0% p0.0%)
14:00 USD US Housing/Home Price Indices
15:00 USD US Consumer Confidence
17:45 CAD BoC Lane speech
20:00 USD Fed Clarida speech

Wednesday February 26
Another quiet day with little news. ECB President Lagarde speaks in Germany.

15:00 USD US New Home Sales
21:45 NZD NZ Imports/Exports/TB

Thursday February 27
Clearly the biggest day of the week for economic releases, the most important being the Durable Goods and inelegantly named Non-Defence Capital Goods ex Aircraft released at the same time as the second preliminary reading of US GDP at 1330. Fed Evans speaks at 1630. There is a rate decision in Hungary.

01:30 JPY BoJ Kataoka speech
10:00 EUR Eurozone Business Climate (Feb)
13:30 USD US Durable/Capital Goods (Cap Goods MoM e-0.1% p-0.8%)
13:30 USD US 19Q4 Prelim GDP (YoY e2.1% p2.1%)
13:30 USD US PCE QoQ
13:30 USD US Jobless Claims
13:30 CAD Canada Current Account (Q4)
15:00 USD US Pending Home Sales
21:45 NZD NZ Total Filled Jobs
23:30 JPY Tokyo CPI (Core YoY e0.6% p0.7%)
23:30 JPY Japan Jobs/Unemployment
23:50 JPY Retail Trade

Friday February 28
The last day of the week and month may bring additional rotation volatility. Fed Bullard (dovish, non-voter) speaks today. All eyes will be on the polling for Super Tuesday on Mar 3rd.

08:55 EUR Germany Unemployment Rate/Change
10:00 EUR ECB Weidmann speech
13:00 EUR Germany CPI (YoY e1.5% p1.6%)
13:30 USD US PCE MoM and YoY
13:30 CAD Canada 19Q4 GDP (QoQ e0.2% p1.3%)
14:45 USD Chicago PMI
15:00 USD Michigan CSI

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