THE WEEK AHEAD: US Data back in the loop
Roundup of last week's events
CHINA: Imports and exports contract
JAPAN: Sentiment continues to wane
FUTURES: JPY bulls back away
VOLATILITY: TA for DAX and EUR
Across the board there appears to be no significant change regarding the direction of large speculators. EUR and GBP futures
USD Futures: Bulls remain partially net long among large-speculators (Non-Comms under CFTC) but clearly lack conviction as the rate of change is more akin to trading on NZD futures than the other FX futures we follow. The 0.8% gain was the second subsequent bullish close and brings into question the preceding downside move seen over the past 6 months but we'll take a closer look below.
EUR Futures: Whilst still net short the indicator is at its highest level since 27th May 2014 (the week it closed below zero at the giddy heights of 1.35). Open interest, whilst rising overall lacks conviction so I am on guard for this to lack follow through and remain net short over the foreseeable future. We also saw both longs and short large specs reduce exposure whilst price continued to decline at the back end of the week so we may see a turning point on the net LS indicator next week.
JPY Futures: Whilst the Yen has gained 13% in the past 6 months (which has seen rates cut to negative over this time period) we can see that it has edged lower over the past week by -1.4% and appeared to have topped 1 month ago printing a 0% change. CFTC positioning shows that the bulls continue to back away but by no means at an alarming rate. So whilst bullish speculators are treading with caution they do not appear to have been spooked as the banks would like to see - which leaves the likely outcome of further jawboning from the Central Bank this week.
AUD Futures: Net long ratio topped two weeks ago but has not seen the downside I had anticipate f, following a rate cut, lower inflation forecasts and a more dovish RBA. However, like previous weeks the data does not capture bearish movements seen in the last 3 days of the week so I expect this bearish trajectory of the net long/short indicator to move down with price.
The Australian Dollar extended losses making it the weaker of the G10 currencies, whilst global stocks and US bond yields fell in tandem to denote a risk-off environment for the weak. Metals also followed suit
USDZAR: Closed at 7-week high, having printed a prominent swing low 3-weeks ago. This adds credence to my argument for a pending USD low. Assuming it continues to the upside and achieves 2.26% range next week (taking annualised, weekly ATR% into account) then we could be testing 3.035 over the coming sessions.
- 2nd consecutive bullish close and now at a 3-week high to confirm bullish hammer at 91.95 low.
- Price remains within a bearish channel so a break above 95.26 is required before coming more confident of bullish continuation.
- Also note the headline grabber 'death cross' which send bearish signals ahead. However, with such MA patterns price often oscillates around the averages many periods after it has occurred so is not necessarily a resistance level.
- Potential bearish wedge formation in the making
- Price is rising on lower volume which raises the odds of such a pattern occurring over subsequent week/s.
- Recent two bearish weeks are of much lower volatility the bullish marabuzo 3 weeks ago.
- So with no immediate threat of it topping out leaving room for another attempt to break higher at least.
- Price accelerating to the downside on rising volume and now below the critical 74c support for 2 consecutive weeks.
- Now reached target projected from expanding megaphone (bearish ending pattern) and beyond.
- 50 back below 200 to show medium term trend accelerating to the downside.
- Evening Star Reversal closed below [previously] bullish trendline
- Higher volume on the bearish candle 2 weeks ago makes a top more likely
- However, the narrow-ranged candle last week with volume at similar level to previous week is a cause for concern for the bears
- Whilst we trade below 0.80/0.8024 a run down to 0.75 is favoured.
Back to the future: USD hangs on to net-long status
During the 6-month decline USD bulls (represented by large speculators) have refused to let go of their net-long exposure. Now pricess have rebounded off of support for 2 weeks the argument for the low appears stronger.