Hi guys,
all eyes at present are on the US dollar for signals of a top here as this such a meaningful asset for all risk markets and global liquidity. Needless to explain the long term inverse to prices of the commodities asset class is crucial. That said with the commodity prices providing a significant inverse beta to the rises & falls in the US dollar. Global inflation expectations and particularly US inflation expectations. US$ pegged asset markets like that of HongKong and also the gulf region also critical to the movement of the US$ here.
For risk markets equities remain strong with a likely mild US correction here and now although how shallow it stays is the crucial question with Sp500 2350 holding for now. And also other key level supports on indexes like the Russell and transports etc. The UST remains under her 2.6% threshold which means a warm tail wind for risk so long as this remains the case. Rates on the SGS rates have reduced recently from 2.5 to 2.25%, good news for the S-Reits. Macro wise, although over night FED rates have increased real yields are strongly negative. Money supply increases remain positive and steeply positive across Europe and particularly UK at +7% p.a.
Euro equity markets are running nicely. IBEX35 the lead in recent weeks, UBS pick up on this. Ive been long and remain off the 9400 levels with leverage, cfds. Given euro sustained strength a cash allocation also fine of course. Better cfds on Hangseng below to avoid the HKD debasement and pick up the nominal gain). I commented a while ago that US$ priced eurostoxx50 had broken out and indeed the breakout remains strong and intact and bodes extremely well for non US equity risk prices in spite of the coming likely US$ weakness (which should in turn provide the last up leg to this out performing US equity wave 5 bull market. A secular bull market that most other regions have totally missed, as we are aware.
Few commentators are talking about the possibility of the start of a new secular bull market for commodities but it seems a distinct possibility given the severity of this recent 6 yr bear market and its impact on forward commodity supply. Below a pdf regarding this possibility. The CRB and other commodity indexes have jumped off their bear lows but they are not a confirmed bull market as yet so the entry is still very early here. The US dollar turn is crucial as is inflation above for this macro trade setup.
FX wise, EURGBP has a setup long euro playing off the recent momentum strength with a with the 200dma very close. For my book i’m long Euro today off the 0.861 level. Just another trade of course, not a strategic trade if you will. Eurusd looks more strategic and personally as a pure fx trade i’m looking for a small retrace to 1.07 vs usd area. Wider strategic allocations, as above are a different game as short term the correlations can diverge from their long term averages and so entries have to taken asset by asset, index by index. The USDSGD support broken. More weakness looks likely following a moment of US$ strength later this week. On the GBP strength and UBS calling for fairly strategic bottom here vs US$ I don’t have the same conviction level. How she reacts on March 29th may tell us more. All in my humble opinion of course.
Here Fitzpatrick from last week at Citi taking a very different line on the GBP and getting the near term wrong re the USDJPY and EURUSD. If he is correct on the EURUSD medium term this will, as above, be fairly significant for entries in other risk markets.
And here MKT
And here Commerz from last week on the bullion mkts:
BullionWeeklyTechnicals15032017
And here Scotia with their monthly gold market report:
It may well be a few weeks yet before we get some clarity on this US$ situation but its going to be crucial for so many risk markets for 2017.
All the best
Rich
(14 votes, average: 5.00 out of 5)
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