Amplify Weekly Strategy

24th – 28th September 2018

Main Events This Week

Monday: GE Ifo Business Climate, ECB President Draghi speaks, US 10% tariff on $200bln imports from China comes into effect

Tuesday: JN BoJ Minutes, US Consumer Confidence, Richmond Fed Manufacturing, Weekly API Inventories, BoJ Governor Kuroda, BoE Vlieghe speak, US President Trump attends UN security Council meeting

Wednesday: NZ Trade Balance, JN BoJ Core CPI, US New Home Sales, Weekly DoE Inventories, FOMC Interest Rate Decision, Summary of Economic Projections, Press Conference with Powell

Thursday: NZ RBNZ Interest Rate Decision, GE Gfk Consumer Climate, GE CPI (Prelim), EU M3 Money Supply, ECB Economic Bulletin, Italian 10-yr auction, US Durable Goods Orders, Goods Trade Balance, Wholesale Inventories (Prelim), Weekly Jobless Claims, Pending Home Sales, ECB President Draghi, Fed Chair Powell and BoC Governor Poloz speak

Friday: JN Unemployment Rate, Industrial Production (Prelim), Retail Sales, FR/SP/IT CPI (Prelim), GE Unemployment Change, UK Gfk Consumer Confidence, Nationwide HPI, Current Account, GDP (Final), Business Investment, EU Flash CPI Estimate, CA GDP, US Core PCE, Personal Income/Spending, Chicago PMI, University of Michigan Sentiment (Final), UK BoE Ramsden speaks

Saturday: CN Manufacturing and Non-Manufacturing PMI

Sunday: Conservative Party Conference begins in Birmingham

Entering the last week of the quarter it is worth baring that in mind come the end of the week. Reallocation, unwinding of positions and where we close will all be interesting to see, especially in the aftermath of the FED this Wednesday evening. We will take a look a bit later about where we stand on the charts but baring a catastrophic drop, the S&P 500 will have made it’s 11th positive quarter out of the last 12!

As you can see from the above highlights, this week really kicks on from Tuesday afternoon. The next five days include speeches from Trump, Kuroda, Draghi, Poloz and Powell, so even in a data heavy week, it would be more than likely to expect words to move these markets more than the reported figures – much like the current price action of the last few weeks. Structuring and planning for the coming days, I would prioritise what Jerome Powell says in the conference as the most important. What are we expecting for next year? How many hikes? Just some of the points the markets will be anticipating.

Whilst you have the planned events for the week listed above, I would be incredibly wary of the Brexit chat which is refusing to go away any time soon. On top of that, any escalation of Trade talks or OPEC announcements can be expected to move the markets as well.

In summary, the FOMC, Brexit headlines, OPEC/Trump chatter and Trade Talks escalation and Month/Quarter end flows will be the main drivers for the week ahead…as it currently stands.

Quarter Pounder….

It’s been a typically odd quarter for the Pound against the Dollar. Whilst we are currently down for the 3-month period, I would not be at all surprised if we did in fact end higher. Of course, to get there you would need a Dovish FED and positive Brexit talk but I’m not completely ruling it out. With Friday’s move lower, a lot of the recent recovery of the asset was undone. Whilst some people were pleased to see Theresa May show some passion at her Downing Street speech on Friday, it was a stark reminder of just how far away from a deal we still are. With October around the corner and the deadlines fast approaching, where do we go from here? In recent times, the 100 DMA has offered either good support or resistance once broken and if you had taken Friday out of the equation I would have been expecting Cable to continue it’s rise. However, now we are back below I would not really be looking to get long unless we technically break and close above it. To the downside, 1.3000-1.3050 looks interesting as potential support with he the mx of the 50 DMA and the high we had back on the 30th August. Where we end the week/month/quarter, as we saw on Friday can be influenced by just one day so as usual I would be very wary about holding for a longer period of time unless we really do get a game changing announcement regarding Brexit or anything clear cut from the FED on Wednesday.

24 a

S&P’s ‘Tarrific’ run continues…..

Is it even that surprising anymore? Another week of ATH’s for the S&P and what can really stand in it’s way over the next few days? Yes, a very hawkish FED might delay a further push to the upside and yes, an escalation of trade war rhetoric between the US and China may also lead to a move to the downside but I feel they would just be momentary speed bumps in the journey of more all-time highs to come. The Nasdaq continued it’s recovery, now just 2% of it’s August high whilst the Dow Jones, lead by the financials saw it’s January ATH broken with 27,000 in sight. On a personal note, I think we make 3000.00 in the S&P before the end of the year, so I will be looking to buy the dips, if given the opportunity. The previous high of 2879.00 and early September lows would interest me to get Long should we get there, but if not – looking for continuations above the highs is also a worth while strategy. I would attribute some concern, as usual, to the cash opens, where we could expect some profit taking coming to the end of the month and quarter. Key risks this week will more than likely be the FED and Trade Talks having seen the tariffs implemented from today. With a bank holiday in China on Monday though, I would be more focussed on what comes out from Tuesday onwards.

24 b

Other Notable Markets.

BoJ, BoE and ECB have had their meetings, whilst the RBA have their one on October 2nd. Focus rightly so will be elsewhere this week but it will be important to listen out for any talk on the strength or weakness of the USD going into month and quarter end.

We reached a massive level last week on EURUSD as shown below but importantly did not close above it. If we do at some point, 1.2000 may well come very quickly. Following the contract rollover last week, we gapped higher and I would be keeping an eye on the 1.1700 area should we see a move lower as we also have the 100 DMA not far off.

24 c

Speaking of key levels, WTI Crude Oil has just broken through a very key price point. We talked last week about favouring the upside and pointing out this area as important – so whether we can extend higher or not will be of interest to many. Whether we would have got here that quickly if not thanks to the Saudi comments we will never know but as Piers talked about in the briefing this morning, traders will be eyeing up the high of the year as a target in the nearer term.

24 c

The final two charts I’d like to point out are the AUDUSD and Gold. The Aussie found support on what has previously been a very solid area. An almost 2% push higher to what now acts as an important resistance area will be key for this market. I’ll be keeping my eye on the 0.7325 area to see where we close following a potential test.

24 e

Just when you think Gold might be recovering, a big snap back below the $1200 handle on Friday halts that progress. I’m intrigued to see what happens this week – will the Dollar weaken or strengthen? For me, that is the main question. A break of the short-term pennant, in either direction is something I am interested in.

24 f

Any questions, feel free to email me on s.north@amplifytrading and for those that missed the briefing – you can catch it HERE.

Anthony Cheung
Anthony is a leading market commentator with over a decade of experience accumulated as Head of Market Analysis at a leading news and analysis organisation, and now a Director of Amplify Trading.