Weekly Review and Outlook 5th December 2016

Mark NugentDec 2016, Trading Plan

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Weekly Forex Review – Week Commencing 28th November 2016

Economic Calendar

Monday

The UAE OPEC Governor cited the OPEC committee as saying that a proposal is ready for ministers. Saudi Arabia is said to offer Iran a freeze at 3.7mln bpd, which is below the 3.97mln bpd requested by Iran (ZeroHedge).

Tuesday

BoC Governor Poloz stated they need to be prepared for the use of additional tools as rates are very low and added they have all the components of a divergence in monetary policy with the Fed. US Preliminary GDP q/q came in above expectations (3.2% vs 3.0%). The RBNZ Financial Stability Report was released and Governor Wheeler stated the RBNZ expects CPI in December to return into target range at just above 1%. This must reduce the chances of further rate reductions. The NZD strengthened. ECB’s Coeure stated QE tapering talk is premature and added Greece could keep a primary surplus of 3.5% of GDP for several years after 2018 (ZeroHedge). It seems likely that the ECB will opt to continue QE beyond March 2017. (Previously they have stated the programme will last until “March 2017 or longer”.) This may be announced at the next meeting, 8th December. This may well cause a rally in stocks.

Wednesday

OPEC reached an agreement to cut production for the first time in 8 years by 1.2 million bpd to 32.5 million bpd, starting in January. Outside OPEC, Russia said it too would cut by 300K bpd and hoped for a total non-OPEC cut of 600K bpd. US Core PCE Price Index m/m was in line with expectation at 0.1%. Canadian GDP beat expectation (0.3% vs 0.1%).

Thursday

Chinese manufacturing PMI beat expectations (51.7 vs 51.0). UK Manufacturing PMI missed (53.4 vs 54.4). US ISM Manufacturing PMI came in strong (53.2 vs 52.1).

Friday

Australian Retail Sales m/m came in at 0.5% vs an expectation of 0.3%. In the US, Average Hourly Earnings m/mdeclined and missed expectation (-0.1% vs 0.2%). Non-Farm Employment Change was bang on target (178K vs 177K).

Market Reaction

The broad market situation was one of consolidation. US, European and Japanese equities all moved essentially sideways at highs or within ranges. Oil moved up by around 10%, closing at resistance at USD52.17/bbl after the successful OPEC meeting. The USD moved sideways just below its 18-year high. The JPY continued to weaken across the week. The GBP continued its rise, begun in early October. The CAD broke through resistance on the oil price. UK and German bond yields moved sideways as the US 10-year continued up on expectations of inflation and higher interest rates.

Trading Plan

Three trades closed last week. Trade 77 (Euro50 short) and Trade 80 (USDJPY) both closed at breakeven. Trade 79 (GBPUSD short) closed for a loss of 0.5%. November performance closed out with a gain of +1.68% and year-to-date performance is +32.6%. Trade 81 (EURUSD short) is still in play after a close call and has been aided by this morning’s Italian referendum result.

Weekly Forex Outlook – Week Commencing 5th December 2016

Over the weekend/early today – Italian Constitutional Amendment Vote was a “no” and PM Renzi has resigned. The EURUSD momentarily hits a 12 month low and the JPY strengthened. NZ PM John Key resigns, effective 12th December when his party will choose a new leader.

Economic Calendar (Interest rates, CPI, Retail Sales, Average Earnings, GDP, Central Bank pronouncements and elections only)

Mon –
Tues – AUD Cash Rate; RBNZ to testify before the Finance Select Committee, in Wellington;
Wed – AUD GDP; BoC Rate Statement
Thurs – EUR Minimum Bid Rate
Fri –

Financial News

Renzi quits

Italian bank shambles

Great timing: Wolfgang Schauble and Greece

Italy overshadows Draghi’s path ahead for QE
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