Weekly Review and Outlook 4th April 2016

Mark Nugent 2016 H1, April 2016, Trading Plan

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Video below
Review of Last Week – week commencing 21st March
Fundamentals and Sentiment – New Information (Economic Calendar)

Monday – US Core PCE m/m 0.1% vs expectation of 0.2% (previous 0.3%). US Core PCE y/y 1.7% vs expectation of 1.8% (previous 1.7%).

Tuesday – US CB Consumer Confidence prints at 96.2 vs expectation of 93.9 (previous of 94.0). Fed Chair Yellen’s speech focused on inflation, in which she noted some concern surrounding low expectation readings and added the outlook has become more uncertain, whilst emphasising that it is too early to tell if the pickup in core inflation is durable. The Fed Chair also pointed out certain headwinds which have the potential to slow the recovery, including a slowdown abroad and a stronger USD. The implied lower rate hike profile had the expected impact: equities rallied, bond yields dropped and USD sank.

Wednesday – ADP Non-Farm Payroll in the US prints at 200K against expectation of 195K (previous 205K revised from 214K). German Preliminary CPI m/m was 0.8% vs expectation of 0.6% (previous 0.4%).

Thursday – Carney’s speech in Tokyo – no transcript. Canadian GDP m/m came in at 0.6% vs expectation of 0.3% (previous 0.2%). In the US, Unemployment Claims miss slightly at 276K vs 266K expectation (265K previously).

Friday – Chinese Manufacuring PMI came in above expectation. UK Manufacturing PMI missed expectation. US NFP was 215K vs expectation of 206K (previous 245K). Average US Hourly Earnings rose by 0.3% vs expectation of 0.2% (previous-0.1%). The important ISM PMI beat expectation at 51.8 vs expectation of 50.8 (previous 49.5).

Fundamentals and Sentiment – Market Reaction

The market was dominated by Yellen’s dovishness on Tuesday. This caused the USD index to drop significantly on Tuesaday through Thursday. The decline did slow on Friday, with the day being only slightly down. The S&P500 rose and broke up through resistance and closed on Friday. The yield of US 10 Year Treasuries dropped significantly as expected by a lower rate hike profile as suggested by Yellen’s dovishness. The Vix hit a low not seen since November 2015. Oil is down on the week as is the commodity basket and copper. The JPY index weakened all week until Friday, when it strengthened. The CAD index seems to have delinked itself from the oil price being up on the week as oil slid. The CAD, AUD and NZD all seem to be range bound.

Trades

I opened one trade last week and it was still open at week end: GBPNZD short. Currently in profit. I will close if it exits the consolidation zone.

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Outlook for This Week – week commencing 4th April
Fundamentals and Sentiment – New Information (Economic Calendar)

Tuesday – Australian Rate and Statement.UK – Services PMI. US – ISM Non-Manufacturing PMI. NZ – Global Dairy Trade.

Wednesday – US FOMC Meeting Minutes

Thursday – ECB’s Draghi due to speak on the financial situation in Europe at the Portuguese President’s Council, in Lisbon. Yellen speaking in New York.

Friday – UK Manufacturing Production.

Fundamentals and Sentiment – Financial Media

http://www.bloomberg.com/news/articles/2016-04-02/traders-to-keep-kicking-pound-as-pressure-builds-over-brexit
http://www.bloomberg.com/news/articles/2016-04-02/russian-oil-output-rises-to-record-as-production-freeze-in-doubt
http://www.bloomberg.com/news/articles/2016-04-02/imf-discussed-pressuring-germany-on-greek-debt-wikileaks-says
http://www.bloomberg.com/news/articles/2016-04-01/brexit-eclipsing-fed-ecb-split-as-top-risk-for-euro-analysis

Themes and Trading Ideas

All trading ideas assume USD strength unless stated.

1. GBP Weakness

Continue to manage GBPNZD trade.

GBPUSD short on exit of triangle.

2. EUR Weakness

EURUSD approaches resistance. Consider shorting on bounce from resistance or move down and through support lines.

Consider shorting EURGBP upon re-entry into channel.

3. Equities

Consider shorting S&P500 upon break down through support.

4. Watchlist

USDJPY currently in middle of channel.

USDCAD consider going long on a double bottom pattern.

5. USD Weakness

See video for detail. This is against the fundamentals – tread carefully.

Monday Morning Sentiment

Equities are mixed and the USD index is up. We are risk-on.

Video

Your video is below (the detail on last week’s trading performance starts at 3:55 and this week’s trading plan is detailed at 13:00).

Please use the playlist button at the bottom of the video window (beside the volume control) to switch between the Weekly Review and Outlook, Daily Alert and Performance playlists.

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