Amplify Trading Weekly Strategy: 1st - 5th April 2019

CALENDAR HIGHLIGHTS

Monday: JN Tankan Manufacturing Index, Manufacturing PMI, AU Manufacturing PMI, NAB Business Confidence, CN Caixin Manufacturing PMI, SP/IT/FR/GE/EU/UK Final Manufacturing PMI, UK Indicative Votes - Round 2, EU Flash CPI, US Retail Sales, Manufacturing PMI, Business Inventories, Construction Spending, ISM Manufacturing PMI, US/China Trade Talks to Continue in Washington, BoCs Poloz to speak, Iranian Oil Minister Meets Russian Counterpart

Tuesday: AU Building Approvals, RBA Interest Rate Decision, JN 10-yr JGB Auction, SP Unemployment Change, UK Construction PMI, 5-yr Treasury Gilt Auction, EU PPI, Unemployment Rate, US Durable Goods Orders, ISM NY Business Conditions, Weekly API Inventories, NZ GDT Price Index

Wednesday: AU Services PMI, Trade Balance, Retail Sales, CN Services PMI, SP/IT/FR/GE/EU/UK Final Services PMI, UK Indicative Votes - Round 3 (potential), US ADP Employment Change, Services PMI, ISM Non-Manufacturing PMI, Weekly DoE Inventories, Fed's Bostic to speak

Thursday: JN 30-yr JGB Auction, GE Factory Orders, SP 3/5/10-yr Govt Auctions, FR 10-yr Govt Auction, EU ECB Policy Minutes, US Challenger Job Cuts, Weekly Jobless Claims, CA Ivey PMI, Fed's Mester to speak

Friday: CN Holiday (Ching Ming Festival), JN Leading Index, GE/SP Industrial Production, FR Trade Balance, UK Halifax House Price Index, US Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Baker Hughes Rig Count, CA Unemployment Rate, Employment Change, Fed's Bostic speaks

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MACRO OVERVIEW - Anthony Cheung (@AWMCheung)

We are set for an interesting few days with important economic data releases due throughout the week alongside the recurring political focus on Brexit and global trade talks between the US and China.

Starting with the general market sentiment this morning, where we have re-opened on a positive footing following the weekend release of forecast beating Chinese Manufacturing data. In fact, the increase in the headline PMI number at 50.5 from 49.2 last month is the biggest monthly jump in seven-years and importantly takes the reading back into expansion territory. 

This comes as welcome relief for a market obsessed with yield curve movement and goes a long way to proving the aggressive measures taken by the Chinese government and central bank may be starting to pay dividend.

Sticking with this theme, the Chinese economic situation and the surface level progression happening in the trade negotiations with the US are both positive forces for demand side considerations in crude oil. This comes as supply side risks continue to be growing with US sanctions on Iran and Venezuela still in focus. To further support upside fundamentals, the US government reported on Friday a decrease in production to 11.9mbpd (12.1mbpd) and US energy firms last week reduced the number of operational rigs to the lowest level in almost a year, with rigs down for six weeks running and lower 8% so far in 2019. 

All of these factors mean there is a growing sense of inevitability that US President Donald Trump will need to start sounding the alarm over high prices as he remains politically aware that the marginal voter in this electoral coalition in 2016, and likely again next year, is a motorist in the Midwest rather than a driller in Texas.

As a guideline, energy correspondent John Kemp of Reuters put out an interesting research report on this last week where analysis on the President's tweets and televised interviews showed he starts to fire the warning shots when oil trades above $60 but aggressively ups the rhetoric once oil tops $75.

Moving closer to home and today marks the second round of indicative votes in UK Parliament where MPs will once more attempt to find a more palatable alternative to the PM's deal. The process by now is a familiar one with a number of options being tabled of which the house speaker John Bercow will select a choice few at 2.30pm which will then be debated and voted on at 2000BST this evening. For a full list of motions please click HERE and to put today's vote into context below is a useful graphic via the BBC.

To provide some background to today's Brexit event, the vote on the 27th March saw all proposals rejected but the customs union plan fell short by a majority of just six votes, so going into tonight's event I would be watching this one most closely and expect to see a pop higher in GBP should it go through. However, my base case scenario is still that no majority on any proposal is found and hence MPs come back Wednesday for round three. If this is the outcome, then I'm sure calls for a general election will continue to grow but I still anticipate that no great headway will be made anytime soon with more meaningful decisions and subsequent movement in UK assets will come closer to the new deadline of April 12.

Earlier this morning we did have the release of UK Manufacturing PMI which blew away expectation on the Street (55.1 vs Exp. 51.0) but before you break out the English sparkling wine the strength in the reading is largely attributed to the impact of Brexit preparations as the pace of stock-piling hit a fresh record high.

Finally, a quick comment on the US economic data due this week with Retail Sales and ISM Manufacturing PMI due today, Durable Goods Orders on Tuesday, ADP Employment Change and ISM Non-Manufacturing PMI on Wednesday, and of course Non-Farm Payrolls on Friday. With all this fresh information due, in addition to influential trade talks continuing in DC from Wednesday, we should finish the week with a much clearer picture as to whether we are in fact bottoming out and getting ready for another push higher in US equities or whether the recent movement in the yield curve carries real substance.

For more thoughts on the week ahead you can catch the morning briefing delivered earlier this morning HERE.

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TRADE STRATEGIES - Sam North (@snorth19)

S&P 500 future...

For the S&P to keep pushing higher – 2865 is pivotal. A break of that and 2900 should come into play in swift fashion. I’m still of the belief we get an All-Time-High soon and the only two resistance points of major interest left before we get there are the current high of the year and the big handle. I’m not quite sure there is a case for the bears at the moment, you would need some significantly negative trade headlines as I think even if some weak US Data came out – it would be a goldilocks effect and be an opportunity to buy as rates stay lower for longer. 

On a separate note, it is worth noting we have just had the ‘Golden Cross’ where the lower moving average (50DMA) goes above the larger moving average (200DMA) – This bullish signal should hold off the bears for a while even though the last GC back in 2016 lead to a sell-off.

WTI crude futures...

If you blink quickly, you could be forgiven for thinking this is the S&P 500. The recovery from late December last year is pretty much exactly the same. They peaked and bottomed on the same couple of days in 2018 and I would absolutely still apply the correlation going forward. The 200 DMA and the 12/11/18 high will be key this week. If you are long this would be a good profit target, however a break through here could well open the door for a bigger extension. Like with the S&P, there isn’t much joy in being a Crude bear right now. A break below $60 could interest sellers slightly more.

Gold futures...

The way Gold broke on the 28th March to the downside and then found resistance on the previous low of the 20th has led me to have a short bias for the week ahead. 1300 would be a line in the sand where the bulls would want to see price break and close above but there is also some decent support below where we are trading. A potential trend-line using the lows of January 24th and March 7th looks interesting and also the 0.382 Fib Level from last year's low to the high of this year should attract some buyers to the market.   

GBP/USD futures...

The trend-line from the 2018 low and the 0.382 Fib level is worth keeping an eye on this week. While I have a bullish bias for the Pound in general, a break below this could open the door to a leg lower. Ultimately it will come down to Brexit developments or lack of, that really drives this market but from a buyer's perspective you would want to see price back above 1.32 to feel more comfortable that Cable could go and test the yearly highs again. 

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