Monday 14 August 2017

Aug 14, 2017 - Weekly Commodity: Risk off sentiment and bearish reports hit commodities

It was a week of swings in the commodity markets with several reports and events driving the market sentiment. The Bloomberg commodity index first jumped 1.4% and then dropped to close the week with only half percent gain. While precious metals and coffee where among the biggest winners, oil and especially grains lost the most.



Crude
According to the IEA, OPEC’s compliance rate dropped in July to a new low of this year at 75 percent. Year-to-date compliance within OPEC is 87 percent while non-OPEC countries were at 67 percent last month. The 22 signatories reduced in July about 470,000 bpd above the combined level they have committed to keep, according to the IEA. After the OPEC meeting that failed to deliver significant proof that the compliance with the cut will improve, the EIA reported another massive 6.5 mil. barrels decline in US crude inventories while Gasoline inventories on the other hand increased by 3.4 mil. barrels. Both are in the upper half of the average range. An upcomming longer term declining trend in crude inventories is also supported by the disappearance of contango in the Crude market which will result that the „buy now - store - sell in the future“ strategy won’t be profitable any more as longer expiries are at the same level as spot prices.

From technical perspective the WTI rejected the $50/brl resistance and the outside day 2 weeks ago and the negative sentiment due to the tension on the Korean peninsula, the Thursday red candle on high volume was especially warning. However while the market tried to break lower on Friday, despite the overall risk off mode it could hold levels $48 and bounced back which is a positive sign but for a few more weeks I expect range trading btw $47-50 (or wider $45-52) before oil will take off on the declining supplies, and the rally could be eventually triggered by Venezuela.



Corn

The weekly crop progress report showed little weekly worsening of the corn condition while compared to the last year the numbers are much weaker. However in the WASDE report there was a huge bearish surprise when the USDA decreased its estimated average corn yield only by 1.2 bushels. And if this wouldn’t be enough, the report suggested higher or unchanged production from the biggest players in the global markets like Russia, Ukraine and Brazil. The slump in corn prices was partially caused by wheat which got a hit from Russia where the USDA expect record production. According to some brokers however, are sceptic regarding corn and soybean data as according to their calculations the yields should come much lower. I think however bulls should be cautious at this point.


Technically the market seemed to be more determined about the direction than last weeks, with volumes rising slightly. The market closed below the 61.8% retracement from recent tops however the last price was still pretty close so there is still some hope for the bulls which may hold for the next WASDE and first harvest reports. However the disillusionment of traders could be very painful.



Sugar

The sweetener was also hit by global risk off mode and record production added to the pain. Brazilian Cane industry group Unica reported 9.5% y-on-y increase in sugar production in the Centre South, the region that accounts for 90% of the country’s sugar output. The dry weather that allowed an unusually early start to cane crushing season is now seems to be a problem. The prolonged period without rain is the main source of concerns together with prices below the ethanol parity. Both can result in drop in sugar production for the rest of the crushing season. According to Brazil industry leader Cosan, the current drop in prices is temporary and the company is expecting sugar to rebound from lows. The company’s hedging activity is declining on the other hand however it’s increasing interest in biofuel sector through its energy venture which could be another way of hedging against price drop.

Technically the inverse head and shoulders formation failed as prices dropped below the neckline testing right shoulder. The 13 cents level will be key whether prices will rebound and take another attempt to reach 16 cent levels. However if this support will not hold the next stop is 12.53 and then 12.00 where the end of our target zone from earlier this year stands. In this case we will have to look at the historical lows of 2015, 10.80-11.10 first long term support and 10.00-10.13 will serve as second support zone.




Good Luck and remember to watch your risk and be consistent

Mr. Tech Man


DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016.
Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

Monday 7 August 2017

Aug 7, 2017 - Market Update (DXY up from strong support, EURUSD correction shallow to 1.1700/1650, A look towards 1.2000 still on the cards, World CBs to reassess how aggressively hawkish they are, S&P sees Fed on hold ,3 hikes in 2018, Iron ore up 5.5% on China continuous stock piling, US stock options - already positioning for increased volatility, Glencore looking to buy into Rio Tinto's assets, UBS private banking with USD 2 trln of AUM)

Short recap

Asia in green
Europe opening higher
New sanctions against North Korea (supported by China/Russia as well)
UK ready to pay EUR 40 bln Brexit bill
S&P sees Fed on hold this year with 3 hikes in 2018
OPEC/Non-OPEC meeting today/tomorrow
Iron ore up 5.5% on China continuous stock piling


Equities

Glencore stretching muscles and increasing offer (USD 2.7 bln) for Rio Tinto’s assets
Deutsche Bank dropping from the list of world’s top 15 private banks
Hit by heavy bill of USD 14 bln for MBS mis-selling
UBS staying at the top with more than USD 2 trln of AUM
Weak USD to keep supporting global stocks further
Elliott disclosed 6% stake in NXP Semiconductors
Likely to make NXP sale to Qualcomm more expensive (USD 38 bln)
US stock options – stocks at highs, volatility at lows…and some investors are already positioning for increased volatility

Bonds

10-yr Trys yield at 2.27% vs 2.23% on Friday
10-yr Bund yield at 0.47% vs 0.45% on Friday

Higher yields are looming but market complacent
Central banks likely to be very cautious not to disturb the market
Funds stay long bonds, not looking to exit trades anytime soon
Recalling 2013 – still far from 3% yields, so visible action from funds yet

Vanguard and BlackRock not happy with bond traders being too complacent link 
Inflation in the U.S. bound to accelerate in matter of months
Bond traders are too complacent and TIPS ‘incredibly cheap’

COT report as of last Tue:

EUR longs at 83k vs 91k previously, cut by 8k
JPY shorts at 112k vs 121k previously, cut by 9k
GBP shorts at 29k vs 26k previously, increased by 3k

DXY

Jumped up from strong support zone (92.64 and 91.88)
NFPs may be seen as an excuse for correction in USD but US yields crucial
Fed expectations pivotal for further USD direction as well as policy direction of other central banks
As their more hawkish stance made their currencies to strengthen a lot versus USD
They are likely to reassess “how aggressively” they want to be hawkish
But it should support USD in a short term only unless political, tax and fiscal mess in US disappears
Have we already seen the top at EURUSD 1.1910 and bottom at USDJPY 109.84?

EURUSD

Shorts pared back some gains as US yields showed no change on market expectations of Fed policy
Support 1.1776 (200 WMA, last week closing below), 1.1772 (10 DMA)
Followed by 1.1723 (23.6% Fibo)
But the critical is the yield spread between Trys/Bunds
Not expecting a deep correction, likely 1.1700/1650 at this stage
Look towards 1.2000 still on the cards

USDJPY

Staying within a tight range
Bids placed from 110.00 up
Resistance 110.78 (10 DMA), 110.97 (61.8% Fibo) and Ichimoku turning line at 111.02
110.14 (76.4% Fibo) and rising trendline as support

Data/events

Mon
Fed’s Bullard (1545 GMT)
Fed’s Kashkari (1725 GMT)

Thu
Fed’s Duddley (1400 GMT)

Fri
Fed’s Kaplan (1340 GMT)
Fed’s Kashkari (1530 GMT)

Aug 24-26 Jackson Hole
Draghi’s show up highly expected in the light of potential tapering
Any clues on EUR 60 bln monthly purchase being taken down o 40…or?
Sep 7 - ECB
Sep 19-20 FOMC
Sep 29 US debt ceiling deadline


Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk



DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom 

Friday 4 August 2017

Aug 4, 2017 - Market Update (NFPs 183k/Earnings 0.3% expected, US yields reaction to NFPs crucial for USD, USDJPY, Gold, EURUSD above 1.1876 but below 1.1900, Siemens to build wind power plant in Turkey, Goldman Sachs buying USD 10 bln of Aramco's credit facility, Tesla - market betting heavily on Model 3 success, Trump productivity stats)

Short recap

Asian slightly higher
Europe opening lower
Russian case moving with subpoenas issued for Trump’s son and his son-in-law
A new India-China stand off in Himalaya?
Toronto home sales down 40% y/y, 4th month of decline
Average purchase price is CAD 746k vs CAD 920k in April
Trump should speak on actions against China but the speech may be cancelled

Trump – productivity stats: In the office for 6 months, played golf for 40 days, Congress has passed 0 pieces of major legislation


Equities

Toyota and Mazda entering joint venture building of plant in US (USD 1.6 bln)
Siemens to build wind power plant in Turkey (USD 1 bln)
Seems like money talks and not NATO issues or politics in this case
Tesla up as market is betting on Model 3 success
Enbridge having some troubles with Line 3, rising costs
Goldman Sachs bought part of Aramco’s credit facility (USD 10 bln)
In a push to secure the role in Aramco’s upcoming IPO
Amazon.com spending big time in Hollywood (USD 4.5 bln)
But the profitability of such activities is still questionable
EU is targeting Visa over the fees it charges merchants for payments made  by non-EU customers within the EU
RBS moving the trading desk to Amsterdam from London

Bonds

10-yr Trys yield at 2.23% - down after BoE took no action and downgraded inflation and economic forecast
Reaction to NFPs will be very closely watched
10-yr Bund yield at 0.45%

DXY

According to BAML USD is not that weak as it may seem
Still 10% overvalued vs its long-term equilibrium
And 12% above its 20-year average in real effective terms
Only tax reform and better US data to help dollar
For the time being they respect market momentum until contrarian signs

Strong support zone (92.64 and 91.88) holding, weekly close crucial for further direction
Levels correspond with 1.2000 level in EURUSD
Combined with 200 WMA at 92.37 helped to support USD over the last 2 years

EURUSD

Trading steady going to NFPs
Moved above 1.1876 (low from June 2010) but stayed below 1.1900
Does it mean a correction coming?
Breaking the 1.1900 is important for bullish momentum to continue
Further resistance of 1.1200 more psychological of nature
Support 1.1768 (10 DMA), bullish bias to stay unless 10 DMA is broken
1.1786 (200 WMA) – a weekly close above?
Expiring options EUR 1 bln at 1.1850 strike

USDJPY

As weak ISM Non-manufacturing keeps pressure on USD
NFPs will be crucial for further USDJPY direction
But all will depend on US 10-yr yield reaction to payrolls anyway
Upside limited on weak USD, low US yields
Resistance 110.14 (76.4% Fibo), then 110.97 (61.8% Fibo)
Rising trendline acts as a support
Bids sitting at 109.85
Expiring options USD 1 bln at 109.45-50

Gold

Getting support from weak USD
But saw some position squaring yesterday going to NFPs today
Global demand is down 14% in H1 as the ETFs demand declined substantially
Resistance at 1274 (76.4% Fibo)
Support at 1261 (61.8% Fibo)
Ascending/descending trendline can also be of note
But US yields and USD direction crucial for further moves

Data/events

US NFPs183k exp vs 222k previously
Unemployment rate at 4.3% exp vs 4.4% previously
Average earnings at 0.3% exp vs 0.2% previously
Weekly jobless claims steadily falling down, thus pointing to tightening job market in US
More and more industries facing shortage of qualified labor

Aug 24-26 Jackson Hole
Draghi’s show up highly expected in the light of potential tapering
Any clues on EUR 60 bln monthly purchase being taken down o 40…or?
Sep 7 - ECB
Sep 19-20 FOMC


Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk



DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom
  

Wednesday 2 August 2017

Aug 2, 2017 - Market Update (DXY close to strong support area 92.64, 200 WMA & 91.88, BoJ keeping powerful QE, Iron ore down 1.8%, Plenty of USD liquidity supporting risk assets, Drop in US car sales to hurt, One Apple a day..., Tesla on stage today, Banks not happy with low volatility, Venezuela bonds struggling)

Short recap

Asia in green as techs were inspired by Apple’s earnings
Europe opening higher1
BoJ on a halfway to 2% inflation, must keep powerful QE in place
Structural reforms needed to boost inflation
Trump to address some China trade practices
Iron ore down 1.8% after three day rally (seems not sustainable) and reaching USD 70 per tonne
As it was on the back of Chinese steel producers just pre stocking
Drop to USD 50 may follow
Sep debt ceiling debate/vote coming
Plenty of USD liquidity supporting risk assets


Equities

Drop in car sales a risk for US economy
Lots of leased cars coming back to market, so automakers will face tough times
But stellar earnings from EU and US keep supporting stocks
Banks not happy with low volatility as it takes the bond trading profits down
Silicon Valley startups facing more pragmatic approach from investors, thus less money
Societe Generale putting EUR 300 mln aside
BP in talks with green car producers to offer a battery charging at its gas stations worldwide

Earnings

Apple surpassed expectations yesterday, hitting all time high in after market
Still struggling in China but moving focus from cars over to autonomous software and all around

Today reporting: MetLife, AIG, Time Warner, Symantec, Molson Coors, Tesla among others

Tesla – market is expecting a rise in revenue but not turning to profit will take time. Model 3 to be a drag for the time being.

Bonds

10-yr Trys yield at 2.27% vs 2.30% yesterday – down on US politics and North Korea
10-yr Bund yield at 0.48% vs 0.54% yesterday
Both Trys and Bund yields felt overnight
Situation in Venezuela getting worse
Sharply falling bonds just reflect the risk of potential sanctions to oil industry

DXY

Strong support at 92.64 and 91.88, weekly close crucial for further direction
Levels correspond with 1.2000 level in EURUSD
Combined with 200 WMA at 92.37 helped to support USD over the last 2 years
Likely to have attempts to break these levels


Source: Saxo Bank

EURUSD

Sentiment is on cautious side at these levels, market reassessing how USD is actually weak
Not likely to move to 1.2000 without any new USD negative news
What’s coming first? Trump or NFPs?
Support 1.1721 (10 DMA), 1.1785 (200 WMA) – to watch weekly close above 200 WMA
Closing below 10 DMA would make bullish momentum weaker
Resistance 1.1200 more psychological of nature

USDJPY

Small hurdle at 110.50
Resistance 110.97 (61.8% Fibo)
Support 110.14 (76.4% Fibo)
Bids sitting at 110.00, stops likely below 109.90

Data/events

ECB Governing Council meeting
Fed’s Mester (1600 GMT)
Fed’s Williams (1930 GMT)

Fri
US NFPs – 173k exp

Aug 24-26 Jackson Hole
Draghi’s show up highly expected in the light of potential tapering
Any clues on EUR 60 bln monthly purchase being taken down o 40…or?
Sep 7 - ECB
Sep 19-20 FOMC


Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk



DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom 

Aug 2, 2017 – Weekly Commodity: Good week for commodities but bulls seem to run a little too fast

Last week was overall very good for commodities supported with both weak dollar and fundamentals as the Bloomberg commodity index rose1.8%. However there are emerging speculations that the bull had run a littlebit too fast and some correction could be ahead, which was supported with the price action in the beginning of this week in most of the US traded commodity futures


Crude
The sharp drop in oil inventories reported Tuesday by API and confirmed by EIA next day were the main mover behind the rally last week. On Thursday API also added data about rising demand in July to the highest level this year pace since. Additionally the announced Russia – Saudi oil meeting regarding deteriorating OPEC compliance with output cut agreement helped also the bulls. After the US announced possible sanctions on Venezuela the WTI touched $50 and managed to close above this important level on Monday however yesterday it gave up these levels with a strong reversal technical pattern after API crude oil stocks increased by 1.78mil barrels.



Corn
In Brazil the corn prices paid to farmers in the central regions are at record low and the government announced export subsidies that will make harder for corn futures in Chicago to recover. From EU corn import forecast are at record high when last week upgraded by 3mil tonnes to 15.3mil tonnes and there is also a robust demand from swine and cattle industries. EU “usable” Corn production estimates were cut by 3.6mil tonnes due to heatwaves in Europe.

Colder weather is expected along the Corn Belt the next 10 days that can limit dryness and heatwaves, and this is a price-negative news. In the Crop Progress report the percentage of corn in excellent and good conditions declined just 1% so USDA doesn’t see any huge damage to the crop so far. Overall grain positioning of hedge funds is supporting concerns that further gains are limited (net long in corn is almost 105k lots… but still far from record lvls)



Sugar
There are rumours that only one month supply was left in India and that the government is considering another tranche of tariff free export to ease the shortage. While an increased demand is expected from India the next couple of months, the normal monsoon rains support sugar cane growers.

The Brazilian government cut biofuel tax which makes biofuels more competitive. Therefore demand for ethanol is expected to be higher ethanol which push higher sugar prices to as ethanol parity is will be rising.  Current calculations shows ethanol parity above 14 cents in sugar price terms and it’s expected to rise until the year end.


Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com



Tuesday 1 August 2017

Aug 1, 2017 - Market Update (Can Trump hit rock bottom? Weidmann – EZ needs a reform, Chinese Anbang Insurance Group to sell overseas assets & bring cash home, Europe experiencing the strongest earnings season since 2017, EURUSD above 1.1785 (200 WMA))

Short recap

Asia slightly up
Europe opening higher
Can Trump hit rock bottom?      
Trump looking at executive action on healthcare
North Korea can hit most of US
ECB’s WeidmannEZ needs a reform


Oil popped over USD 50 on high fuel demand and HF short covering
While supply still high

Equities

Shell putting a financial hand in solar firm Sunseap Group
BNP Paribas interested in Strutt & Parker
Brexit to increase the needs for capital by 30% and costs by 4% for banks
Trump taking on insurers after Obamacare repeal vote failed again
LabCorp eyeing Chiltern (USD 1.2 bln) to expand oncology activities
Tesla down on “manufacturing hell” as Elon Musk commented the production of Model 3
That may last 6 months until the cash burn ends and company will start to make profits

China asked Anbang Insurance Group (huge insurer) to sell its overseas assets and bring cash home

A sign of troubles coming… More here & here

Earnings

Europe experiencing the strongest earnings season since 2017 with EBITDA at record highs
US doing well too witnessing sales and EPS acceleration

Apple – market is expecting an increase in revenue on the back of higher sales of its smartphones while checking also on a new release if iPhone that may be delayed until Oct

Pfizer – to report higher earnings supported by breast cancer treatment sales. The drag on earnings might be (as of other peers too, the patent expirations)

FireEye, Devon Energy, Under Armour

Bonds

10-yr Trys yield at 2.30% vs 2.28% yesterday
10-yr Bund yield at 0.54% vs 0.54% yesterday

EURUSD

Broad weakness pushed EURUSD higher
Higher EZ inflation making market believe in a hawkish ECB
But looking at Fed not hiking this year again
Support 1.1690 (10 DMA), 1.1785 (200 WMA) – checking what’s going on there
Resistance 1.1200 more psychological of nature

USDJPY

Heavy on USD weakness
Bids at 110.00 (around option barrier)
Also some options (USD 1 bln) expiring around this level
Speculators may be hunting stops below 110.00
Resistance 110.97 (61.8% Fibo)
Support 110.14 (76.4% Fibo)

Data/events

Wed
Fed’s Mester (1600 GMT)
Fed’s Williams (1930 GMT)

Fri
US NFPs – 173k exp

Aug 24-26 Jackson Hole
Draghi’s show up highly expected in the light of potential tapering
Any clues on EUR 60 bln monthly purchase being taken down o 40…or?
Sep 7 - ECB
Sep 19-20 FOMC


Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk



DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom