Amplify Weekly Strategy: 11th - 15th February 2019

CALENDAR HIGHLIGHTS

Monday: JN Holiday, CN New Loans, UK GDP, Industrial/Manufacturing Production, Trade Balance, Business Investment, Construction output, NIESR GDP Estimate, EU Eurogroup meeting (tentative) US Core PCE (tentative), CA Trade Balance, US/China high-level trade talks recommence

Tuesday: AU NAB Business Confidence, JN Machine Tool Orders, CN Foreign Direct Investment (tentative), WR OPEC Monthly Report, EU Finance Minister's Meeting, US NFIB Small Business Optimism, Weekly API Inventories, Fed's Powell, George, Mester, ECB's Weidmann, Lautenschlaeger, BoE's Carney speak

Wednesday: JN PPI, NZ RNBZ Interest Rate Decision, UK CPI/PPI/RPI, House Price Index, EU Industrial Production, IT 3/7/30-yr Govt Bond Auction, UK PM May brings revised deal back to Commons for approval, US CPI, Goods Trade Balance, Real Earnings, Unit Labour Costs, Housing Starts, Building Permits, Weekly DoE Inventories, Federal Budget Balance, IEA Monthly Report, Fed's Bostic, Mester, Harker speak

Thursday: JN GDP, CN Trade Balance, Imports/Exports (tentative), FR Unemployment Rate, GE GDP, EU GDP, Employment Change, UK RICS House Price Balance, 10-yr Govt Bond Auction, UK PM May presents motion for amendments by MP's, IR CPI, US Weekly Jobless Claims, PPI, Retail Sales, Business Inventories, CA ADP Non-Farm Employment Change, Manufacturing Sales, New Housing Price Index, BoE's Vlieghe, Fed's Harker, RBA Kent speaks, US trade and treasury officials meet Chinese counterparts in Beijing for trade talks

Friday: CN CPI/PPI, JN Industrial Production, Capacity Utilisation, SP CPI, IT Trade Balance, UK Retail Sales, EU Trade Balance, US Retail Sales, Import/Export Price Index, Industrial/Manufacturing Production, Capacity Utilisation, Preliminary University of Michigan Sentiment, Baker Hughes Rig Count, TIC Data, Fed's Bostic, Mester speak, US trade and treasury officials meet Chinese counterparts in Beijing for trade talks

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MACRO OVERVIEW

China/US trade talks still a driving force for intraday sentiment...

China return from their Lunar new year holiday and it's straight back to the business of trade discussions with the US. High-level talks are set to commence today in Beijing with US trade secretary Robert Lighthizer and treasury secretary Steven Mnuchin meeting their Chinese counterparts on Thursday and Friday. Our view remains that progress is likely to be slow and steady, meaning that the worst case is averted and ultimately talks will allow an additional extension, delaying tariff hikes beyond March 1st.

From a markets points of view, the reaction to this outcome is likely to be limited as the status quo remains but the tail risk is that any breakdown in dialogue might create short-bouts of selling pressure in US equities, reminding the powers that be how fragile market sentiment is to developments on this matter.

Another US government shutdown on the table...

Bloomberg news report that talks to avert a second US government shutdown over boarder security funding broke down late Saturday, according to two people familiar with the talks. Without a funding deal, nine federal departments and related agencies would shutdown again after Friday.

If this was to occur I don't see this as an immediate trigger for aggressive risk off trade as markets are somewhat desensitised to this process. However, if such short-term stop-gap funding were to persistent with no long-term fix then one would think there is only so much patience the market will have.

Kicking the can...

Although Brexit continues to dominant domestic news flow the reality is that PM Theresa May is likely to promise another vote on other options if a deal is still not ready by the end of February. As such, it has rendered this week's hearings as largely binary and with still 6-weeks to d-day it seems politicians on both sides of the channel are still willing to push this down to the 11th hour.

Given this reasoning, Brexit news is still to be monitored with vigilance but the dynamics of the USD, which recently printed its best weekly gain since August 2018, and the slew of major economic data from the UK this week (GDP, CPI, retail sales), mean that it might be forces outside of the House of Commons that may have more of an influential impact on cable.

US earnings, significant but not important...

Below is a table of the most anticipated US earnings this week of which there are a total of 65 S&P 500 companies and 2/30 from the DJIA. Although this will be meaningful for the stocks in question, from an index futures point of view the impact is likely to be muted as most of major firms and sector bellwethers have now reported and macro risks events mentioned above will likely saturate most the markets attention for now.

If you would like further insight and analysis of the charts across asset you can access our morning briefing HERE

Anthony Cheung – Head of Market Analysis (@AWMCheung)

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TECHNICAL OVERVIEW

S&P 500 Futures

The return of the 200DMA! This time capping the market as a resistance level. So that would still be a big level to keep an eye on should we have a positive start to the week following the return of China to the market. A solid finish to last week sees the market contained between the 12th December high (now support) and the 200DMA.

Those are the two key points of interest in my opinion. Bullish above and bearish below for the short/medium term. Should we break the moving average I have marked up a key area where we could find some more serious resistance.

GBPUSD Futures

A return of some USD strength into the back end of the week against the Major pairs would suggest more is to come over the next 5 days. 1.2860 area is massive for the bulls to protect. A significant break and close below and a quicker move lower could take place. Would have the Fibonacci on from the 2018 Low to 2019 high as well as it matches up very nicely. Ultimately fundamentals will drive this market, but sentiment short/medium term could we depend on how this area behaves this week.

Gold Futures

I think we will get a test of 1300 soon with the return of the USD strength and that will be quite interesting to see where we finish the days and this week once that happens. The 2018 Highs do seem a long way away but if we have a strong reaction to 1300 I could see those levels reached in the coming weeks/months.

Looking back at the price action of Gold it has been incredibly technical and this mini range of the May 2018 High/High of this year to 1300 is so key for where this market goes. A break below the handle and 1275 would be a good target to consider.

WTI Crude Oil Futures

All about that trend-line! With that break you saw US Equities follow suit to the downside and was such a good opportunity to see the technical levels working well across the board. We have developed an interesting trend-line from the high of the year which the bull would want to see broken but if we continue a move lower the 28th January would be key before a potential test of the 50% Fibonacci and the low of the 14th January.

Looking elsewhere we had a good break lower in AUDUSD, a trendline from the low of the year gave way in early trade last Thursday and the downside now must be the favoured direction in mu opinion. EURUSD is at a key level historically – 1.1300 has been solid support for quite some time so I would be keeping an eye on that as well.

Sam North – Associate (@snorth19)

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