Weekly Game Plan - 29.5.16

Themes for the Week and Potential Opportunities

Reminder: trading will commence again on Tuesday since US and UK markets are on holiday Monday. With illiquid markets, it's usually better to keep powder dry. 

US: focus will of course be on NFP, which is expected to print slightly weak (150-160 K) but not enough to discourage the FED. More importantly, AHE should remain on track with a +0.2% and unemployment should drop to 4.9%. Other data during the week includes: personal income & spending (Tue) expected to rise; Chicago PMI (Tue) is expected to rise; ISM manufacturing index (Wed) is expected  to fall slightly;  construction spending (Wed) should rise; ADP (Thur) is expected strong at 180k; ISM non-manufacturing index (Fri) to fall slightly and  factory orders are also expected lower. So on balance, the outlook is actually negative for the USD.

EU: Busy week ahead. We have EU sentiment indicators (Mon) are expected to rise. German CPI is also due, expected higher at 0.2%. German unemployment (Tue) is expected to show a drop of 2K which would keep the Unemployment rate steady at 6.2%. EU unemployment rate (Tue) is expected to fall to 10.1% but the flash estimate of EU HICP is expected to falll, while core inflation is expected to remain unchanged at 0.7%y/y. PMI surveys (Wed) are expected to remain firm. But the major event of the week will be the ECB (Thur) although no change is expected. Final service/composite PMIs (Fri) should also show consistent growth. On balance, the outlook is positive for the EUR.

UK:  Manufacturing PMI (Wed) is expected below 50 but slightly higher than previous; Construction PMI (Thur) is expected to fall and Services PMI (Fri) expected to rise slightly but EU referendum uncertainty will still overshadow these releases. On balance, volatile and unclear week on GBP.

Comm-Dolls: Australia has a busy week. Company Operating Profit & Inventories (Mon); Current Account (Tue) and building approvals (Tue) are expected better than previous; AIG Performance of Manufacturing Index (Wed) and GDP are also due and might show some weakness; retail sales (Thur) might show lower growth than the previous print; AIG Performance of Services Index (Fri) is the last data point for the week. On balance, the outlook seems slightly bearish on the AUD.

A key focus (for Cad above all) will be the OPEC meeting in Vienna (Thu). Discussions will center on be on a potential response to recent supply disruptions, including Canadian wildfires and militant attacks in Nigeria. In particular, markets will be watching for any signs of an increase in Saudi Arabian production levels but most likely, OPEC's current strategy will be maintained for now,

CHN:  markets are expecting a marginal fall in the official Chinese manufacturing PMI (Wed) and similarly in the Caixin manufacturing PMI (Wed) which might influence risk appetite negatively.

Going into the week I will be looking for longs on US indices in line with recent risk appetite; in FX however I will be cautious on current trends based on the amount of space covered already this month. In particular on Aussie and Jpys. So whilst AudUsd short/GbpAud longs remain good looking candidates, I will be cautious. Same goes for GbpJpy longs and EurUsd shorts.

 

Weekly Game Plan - 22.5.16

Themes for the week and potential opportunities

Not much to say regarding the G7 meeting thus far. A tad of debate between Lew and Aso on the BoJ's activity but other policymakers have been quite diplomatic.

Articles of interest:

http://www.reuters.com/article/us-g7-japan-idUSKCN0YC03O

http://www.reuters.com/article/us-g7-japan-summary-idUSKCN0YC04Y?mod=related&channelName=ousivMolt

US: less exciting week for the greenback. Fedspeak will likely be the main focus with Janet Yellen speaking at Harvard at 10.30ET Friday, and plenty of Fed speakers during the week. Q1 GDP (Fri) is likely to be revised up to 0.9% from 0.5%, but all the attention is already on the expected pick-up in Q2. Sentiment seems to be neutral from an expectations perspective, with a positive backdrop from last week.

EU: Busy week ahead. PMIs (Mon) expected to edge higher. The Ger ZEW survey (Tue) should also show improvements.  The IFO (Wed) is also expected to improve. So there is a definite positive bias on the Euro going into the week. It may be better played on the crosses rather than vs. USD.

GBP: Bremain made Sterling the star of last week; Bremain/Brexit continues to be the main driver. BoE's Carney will testify before the TSC (Tue) and could also steer public opinion.  Then it's the second estimate of Q1 GDP (Thur) expected to be revised lower.

Comm-Dolls: AUD still poised for losses while RBA keeps the market on edge. Main focus this week will be Capex (Thur) which is expected to fall, alongside speeches by RBA Governor Glenn Stevens and Assistant Governor Debelle. CAD might continue to suffer from the Alberta wild fire fall out.

Going into the week I'll be looking for Cad and Aud shorts vs Usd, Gbp and - depending on data - Euro.  I'll be watching Gbp polls for clues on Gpb strength/weakness. Risk assets unclear thus far. Better to wait for more information.

Weekly Game Plan - 15.5.16

Themes for the week and potential opportunities

Risk appetite into the week might be negatively influenced by disappointing Chinese data ( http://www.reuters.com/article/us-china-economy-activity-idUSKCN0Y506N ) issues over the weekend. Dax would be my preferred vehicle for trading (short) into this theme. 

US: It’s a busy data week in the US. FOMC will be the highlight but a June hike is not in the cards. However, if the FOMC shows the committee less divided than the market expects, we could also get a USD pounce. Fedspeak will also be influential this week. Datawise, we have Empire State (Mon) expected to fall, NAHB homebuilder’s index  (expected to rise) but it's really the CPI (Tue) that will be watched closely and is expected to rise. Tuesday also bring housing starts and permits (+4.7% and +8.7% expected, respectively).  Philly fed (Thur) also expected higher. So on balance, this week, the market is poised for positive US data output.

EU : Light calendar with  account of the April ECB meeting (minutes, basically) out on Thursday.

JPN:  advance Q1 GDP (Wed) is the focus and the market is poised for a bearish outcome. This would add pressure to MoF/BoJ.  

UK: busy week ahead with CPI (Tue) expected slightly lower. More important is Employment data (Wed) expected to see a 5k increase in the claimant count, the ILO unemployment rate unchanged at 5.1%, and average weekly earnings growth slowing  to 1.6% from 1.8% in 3m y/y terms.  Retail sales (Thur) are expected rise. So on balance, a slightly negative expectation for Gbp.

Comm-Dolls: The minutes of the RBA (Tue) are unlikely to tell us anything we did not either hear at the time or read in the Monetary Policy Statement. Q1’s wage cost index  (Wed) is expected to drop slightly, but employment data is expected to show a more modest rise of 4.2k after a  26.1k last time, though the unemployment rate is expected to go back up to 5.8% from 5.7%.

Loonie traders only have Retail Sales (Fri) to look forward to. Crude oil will decide the Cad's fate the rest of the week. 

NZD traders only have Tuesday’s GDT dairy auction to watch.

So going into the week I'll be looking to play the bearish Gbp and bearish Aud themes, vs. USD strength and also Jpy strength (if we get some risk-off form China data).

Weekly Game Plan - 8.5.16

Themes for the week and potential opportunities

Seems to be a quiet week with the exception of the Bank of England so I'll be on the lookout for potential emerging dynamics.  Chinese data will be taken into account early in the week, and Trade Data so far has disappointed. 

US: NFP missed expectations but AHE held up and the USD kept it's strength into the weekend. This is interesting and shows some kind of underlying strength. We have a quiet week ahead for the USD until Retail Sales on Friday (expected to rebound higher). Fed Presidents Evans and Kashkari (Mon) and Mester, Rosengren and George (Thu) will most likely support the idea of a June hike.

GBP: The BoE (Thurs) is the highlight on the calendar this week but the chances of any change are pretty much zero. Even though these very same conditions (weakening data, easing by other CB's) would have turned the tide yeras ago, the Bank will likely argue that referendum uncertainties are in play in the numbers and anything other than 9-0 for the status quo would be a major surprise.  We also have Ind. Prod. (Wed) expected +0.2% m/m for the headline and y/y to -1.0% from -0.5%. Manufacturing is expected +0.3% m/m (after -1.1%) with y/y at -1.9% from -1.8%. April’s RICS house price balance is on Thursday, March construction output on Friday.

EUR:  quiet calendar in EU this week, with a revision to first quarter GDP growth, revisions to April CPI estimates, and March industrial production growth as highlights.

Comm-Dolls: There is not much news on Australia, New Zealand or Canada this week but the Chinese trade data over the weekend will be an early focus especially for Australia, while China’s inflation data is also scheduled on Tuesday.  The BoC’s Wilkins is due to speak on Wednesday, the RBA’s Edey on Thursday.

Going into the week Aud still looks like the weakest of the pack and Jpy is the strongest. So I'll be looking for AudJpy shorts, AudUsd shorts, EurAud Longs. UsdCad Longs, CadJpy shorts. Gbp might pop up later in the week.

Weekly Game Plan - 1.5.2016

Themes for the week and potential opportunities

Japan is closed Tue-Wed-Thurs so watch the Jpy on Monday and Friday. NFP is the big focus at the end of the week, though average hourly earnings likely to be the main interest once again. Unless we get incredibly strong headline (> 250K), above trend earnings and high CPI readings, nothing can justify a June Hike and the USD won't get any mercy.

Chinese data was slightly worse than expected this weekend, although still in expansion territory. So that will have to be discounted as the week opens.

US: The week starts with ISM manuf. (Mon) expected 51.5 from 51.8. March construction data is also due. The trade deficit (Wed) is expected down to USD40.3bn from USD47.1bn and a 1.2% fall in Q1 non-farm productivity with a 4% rise in unit labour costs. ISM non-manuf is expected 55.5 from 54.5, and March factory orders are seen +0.6%. NFP (Fri) is the main event of the week and +210k is expected, with unemployment down to 4.9% from 5.0%. However, the main focus is likely to be on average hourly earnings expected +0.3% m/m. 

Fed speakers are back out in force this week so stay tuned.

AUD: RBA (Tue) is expected to keep rates at 2% while maintaining its modest easing bias. The Statement on Monetary Policy is due on Friday. AUD traders will also be looking out for official and Caixin manufacturing PMIs from China on Tuesday. The Federal Budget for fiscal 2016/17 will also be announced. Retail Sales and trade balance (Thur) also a focus. 

NZD: Unemployment data (Tue) will be the foal point along with the usual GDT  auction.

GBP: PMIs are the focus. Manufacturing on Tuesday, construction on Wednesday, services on Thursday with a general weakening expected. 

JPY: Monday and Friday are the only trading days for Jpy. Watch out for any MoF/BoJ intervention in low liquidity times. Also, on Friday watch out as the Nikkei catches up to other equity markets.

CAD: employment data is released alongside NFP, with a 5k fall expected to lift unemployment to 7.2% from 7.1%. March trade data is on Wednesday, building permits are on Thursday.We also have BoC speakers:  Poloz on Tuesday, Schembri on Friday.

Going into the week, I continue to favour short AudJpy & Usd/Jpy, long EurAud and EurUsd.