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THE WEEK AHEAD
A MAJOR OVERVIEW
Euro futures saw a slight increase in net short exposure and JPY remains the most bullish among large speculators. This makes EURJPY one to consider for longer-term bullish positions (D1 and above) assuming the technicals and fundamentals align.
US Futures saw a slight reduction on long exposure which was caused by an increase in short bets by large specs. Price action, whilst continuing to decline, could still be forming a correction from the 2015 highs so more conviction is still required by large specs to be sure we will see a break below 93 over coming months. However this is something to monitor.
CAD futures are on the brink of breaking to net long exposure by large specs, making the ratio at its highest level since it broke to net sort back in June 2015. It should be noted that the previous two attempts to remain net long (in June 2015 and July 2014) have both failed, only to see the Loonie drop lower over subsequent months. This is where keeping a close eye on the commodities rally and Bank of Canada monetary policy remains key.
Friday's NFP data came in higher than expected, at 215k vs 205k forecast. Unemployment ticked slightly higher to 5% from the multi-year low of 4.9% and, although too early to be calling a bottom in the rate, one has to wonder if it will now display a similar pattern to the continuing jobless claims which troughed several months ago. The continuous read has a highly inverted correlation with the stock market which also suggests a topping pattern could be in play. Watch this space.
As suggested in Friday's NFP preview video I suspected it would be the manufacturing PMI data which stole the show. This turned out to be the case as it dragged itself from contraction territory for the first time in six months and printed an admiral 51.8 expansions. As highlighted in the China PMI data set last week, whilst a nice victory for the bulls, too early to call it a significant trough at this stage un my humble opinion.
China: The main event from China was their increasing PMI - in what appeared to be a week of positive manufacturing data for the globe. This certainly helps global growth concerns improve in the near-term, but as outlined in the post we need to take this in context of the previous 6-2 month of data and not get ahead of ourselves just yet with excitement.
Australia: Manufacturing soared to a 16yr high but we will continue to monitor the construction and services reads coming up, as these have a higher input to GDP. The Aussie has been benefitting from stronger commodities in recent week, but now Gold has stalled and Oil suggests a deeper retracement is on the cards, we have to question the upside on AUDUSD as it also pauses near key resistance.
Canada: Industrial production and raw material prices accelerated their decline but the CAD crosses were taking more notice of stronger commodities and weaker Greenback, over domestic data. It finished the week on a firmer note after seeing GDP beat expectations of 0.3%, to print 0.6% on the month whilst manufacturing data also expanded for the first time since September 2015 and now at its highest rate of expansion since June 15.
United Kingdom: GDP also ticked higher by 0.6% but it was the current account deficit which stole the show, accelerating to its widest deficit on record to £37.7bn compared with a 'mere' £21bn expected. This, combined with Brexit fears, continues to bear weight upon the British Pound making it harder to justify a rebound against the buck (or anything else for that matter.
Weekly Wrap: 4th April 2016
A summary of key events and money flow from prior week to help with your trading process in the week ahead.