Week to Oct 1st

End of quarter, SPX worst week of the year, Dollar makes 2021 highs

MY CALL THIS WEEK : BUY NZDCAD

LAST WEEK

The raising of the debt ceiling prompted a rise in yields, which together with other negative factors such as the energy crisis, and Chinese slowdown meant SPX had its worst week of 2021, and worst month of the year, whereas the safe-haven dollar had its best week since June, making new 2021 highs, with all pairs except CAD down. The risk-off mood gave the DJI/NDX ratio its best week since May as NDX touched July lows. Oil also touched July highs, and is less than a dollar away from a seven-year high.


WEEKLY PRICE MOVEMENT

The biggest mover this week was NKY, down 4.89%. The top forex mover was NZDCAD this week, down 1.28%. Bitcoin and ETH bucked the general trend and were up over 12%.  FANGs were generally down as much as NDX.

My CADJPY short lost 0.29% taking my year to date profit to 7.23% and 27/38 wins. This week I will try the reversal strategy and buy NZDCAD.

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)

In September, Fed Chair Powell noted it'll take one more "decent" jobs report to set the taper wheels in motion - not a "super-strong" one, just one that's "reasonably good". This week’s estimate of 500K, if met or exceeded should do the trick. The market response will show how much taper is already priced in, after September’s 4% drop, the worst month since the pandemic started. We are at a juncture, DJIA has just bounced off the SMA200d as it did last November, but historically October is the second-worst month (after September!) for equities.  Our research suggests NFP week is usually positive, and next week onwards earnings will be the main driver.

On Monday, OPEC meet to review output. The current plan is to increase output by 400kbpd, the latest ‘tapering’ of the cuts. However, given that the price of oil is over $75, a level it has not breached for seven years, and recovery demand being stronger than expected, the committee may well agree a larger increase. Unusually, the market has not priced this in yet.

On Wednesday, COVID fortress New Zealand (only 4,000 cases and 27 deaths), which has already ended QE, is almost certain to double the NZD base rate to 0.5%, being the first of the major six to do so, and third overall (after KRW and NOK).


CALENDAR (High volatility items in bold)

Monday October 4
08:00 OPEC Meeting

14:00 US Factory Orders
21:30 Aus AiG Construction Index
22:00 Aus Commonwealth Bank Svcs PMI
23:30 Tokyo CPI

Tuesday October 5
00:00 Aus TD Securities Inflation
00:30 Aus Imports/Exports/TB (TB e10.6B p12.1B)
03:30 RBA Rate Decision/Statement (e0.1% hold)
07:55 Germany Markit Composite PMI
08:00 Eurozone Markit Composite PMI
12:30 US Trade Balance
12:30 Canada Trade Balance
13:45 US Markit Svcs/Comp PMI
14:00 ISM Services PMI (e59.8 p61.7)
17:15 Fed Quarles speech

Wednesday October 6
01:00 RBNZ Rate Decision/Statement (e0.5% p0.25%)
06:00 Germany Factory Orders
09:00 Eurozone Retail Sales
12:15 US ADP

Thursday October 7
05:00 Japan Leading Economic Index
06:00 Germany Industrial Production
11:30 ECB MPC Accounts
12:30 US Jobless Claims
12:40 Fed Williams speech
14:00 Canada Ivey PMI
16:00 BoC Governor Macklem speech
23:30 Japan Household Spending/Current Account

Friday October 8
01:45 China Caixin Services PMI
06:00 Germany Trade Balance
12:30 US NFP/AHE/UnEmp (NFP e500k p235k)
12:30 Canada NFP/AHE/UnEmp (UnEmp p7.1%)