Large Speculators reported positions (data from CFTC)
- Overall there were no significant changes to the weekly positionig but we also need to keep in mind it does not include changes following the dire employment data set late on Friday.
- The chart above shows money had flows back into the USD but this is a trend I would expect to reverse if the NFP data on Friday was anything to go by.
United States: Nonfarm data sent a jolt through the markets late on Friday as it fell short of expectations, at 142k vs 201k frecast. This is only the second time since 2012 it has printed below 200k on two consecutive months. FOMC minutes will not contain any references to the poor employment data set but markets are currently pricing a 0.25% rate hike from March 2016 at the earliest. Personally I do not see how on employment data set will be a make or break for FED decision who, until recently, continued to make hawkish comments following soft global growth concerns and market volatility. So I will wait to hear any further commentary before deciding, but for now stick to my original stance (back from Dec 2014) they FED will not raise this year.
Australia: The RBA Cash rate decision tomorrow will be of greater interest now the FED appear to be on the back foot. I do not see scope for a rate cut but any wording (or changes to) their expectation of FED raising rates this year will warrant attention. Economists are forecasting a cut around February or March 2016 with potential for two cuts during the year.
United Kingdom: Manufacturing and Construction PMI both beat expectations last week but the underlying trends continue to diverge. Manufacturing rate of increase has been steadily declining since 2014 and appears only a matter of time before it dips below 50 to contract. Construction however may have seen a trough around May, so the near-term trend looks more positive as it now sits at a 7 month high. GBPUSD may have seen a swing low last Wedgesnday, having closed the week with a Morning Star Reversal on D1 and retraces from over-stretched levels. Main calendar events this weel include Services PMI, Manufacturing Production, Bank rate / statement and Carney speech.
Canada: CAD crosses continued to shows signs of potential strength and break the bearish commodity currency trends. Oil prices, whilst remaining above key support levels, are also lacking any bullish momentum so hard to be confident in the next directional move. However we would hope for Oil prices to bounce higher to help CAD move further away from oversold levels. Main calendar events this week include Trade balance, Building Permits, employment and a speech from GOv Poloz. However our policy outlook remains neutral, making USDCAD more a story of US data and Oil prices.
Europe: EURUSD has not taken the direct losses I had envisaged, as last week provided bearish outlooks for bot US and EUR on a near-term basis. Unemployment in Eurozone rose to 11%, German retail sales were soft, Inflation data hit -0.2% and PMI for Spain and Italy also disappointed. All of this points to an increased likelihood of QE2 for Eurozone, which traders promptly short Euro crosses on the back of. It is just a shame that NFP disappointed otherwise we would have got the direct USD losses I had expected. Draghi speaks this week; perhaps he will "have enough data" for ECB to plough on with QE2.
New Zealand: NZDUSD printed its first bullish month since April, albeit a very small green candle. However we sit below 0.6470 resistance and appear on the cusp of break to a two month high if it takes advantage of Greenback weakness. Tuesday's calendar may be able to give it a helping hand with Business confidence and Global Dairy Trade prices (GDT). That said, ANZ barometer of business has been negative for 3 months and this week's NZIER reading is on the cusp of providing a negative print for the first time since 2012. If that does occur, then the 0.6470 resistance would be the ideal place to consider selling.
China: Lower volume can be expected in the first half of this week as China's bank holiday lasts until Wendesday (so liquidiy may return on Thursday for Asian traders). However there is a lack of significant calendar events so any fears from CHina are firnly on the back burner this week.
WEEKLY WRAP: Major crosses to take advantage of bruised Greenback
With weak employment data still fresh in the minds of traders I expect we'll start the weak FX majors taking advantage of a bruised greenback, helping stocks remained elevated from the recent, turbulent lows.