Amplify Weekly Strategy: 18th - 22nd Feb 2019

CALENDAR HIGHLIGHTS

Monday: Core Machinery Orders, UK Rightmove House Price Index, GE Bundesbank Monthly Report, US Market Holiday - Presidents Day

Tuesday: JN Reuters Tankan Index, AU RBA Minutes, IT Industrial New Orders/Sales, EU Current Account, UK Average Earnings, Employment Change, Unemployment Rate, GE ZEW Economic Sentiment, US NAHB Housing Market Index, NZ GDT Price Index, Fed's Mester speaks

Wednesday: JN Trade Balance, AU Wage Price Index, GE Bobl Auction, UK CBI Industrial Trends Orders, EU/BE Consumer Confidence, US FOMC Minutes, Weekly API Inventories, Fed's Bullard speaks 

Thursday: AU Employment Change, Unemployment Rate, JN Manufacturing PMI, FR/GE CPI, FR/GE/EU Manufacturing/Service PMI, SP Trade Balance, 3/5/10-yr Govt Bond Auction, UK Public Sector Net Borrowing, TSC Inflation Report Hearing, ECB Monthly Minutes, US Durable Goods, Philly Fed Manufacturing Index, Wholesale Sales, Manufacturing/Service PMI, Existing Homes Sales, Weekly DoE Inventories, Fed's Bostic, BoC's Poloz, RBA Lowe to speak

Friday: JN National CPI, CN House Prices, GE GDP, Ifo Business Climate, EU CPI, UK Distributive Trades Survey, CA Retail Sales, Budget Balance, US Baker Hughes Rig Count, Fed's Bullard to speak

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MACRO OVERVIEW - Anthony Cheung (@AWMCheung)

A relatively lacklustre start to the week with no new major news over the weekend, in addition to North American participants out of the market today for President's Day (US) and Family Day (Canada). The major macro stories in play remain the same with Brexit, US/China trade talks and central bank speakers the focus.

Brexit: All talk no action...

Starting with Brexit, this week is likely to be full of meetings and cross channel negotiations but the likelihood of anything of substance materialising on the contentious issue of the North Irish backstop is limited. Therefore the calendar of key events on this subject needs to be a consideration to any GBP trade but a strong relief rally on a compromise being found, or a complete shift to pricing in a 'no-deal', I think is a little premature with the next meaningful deadline not until Feb 27th providing politicians in Westminster with further term to leverage their positions.

Trade talks move to Washington...

Despite there being several risk factors globally (ranging from economic slowdown, policy tightening, no deal Brexit, geopolitics to name a few) the on-going trade war between the US and China remains the biggest story in town and as such warrants continued vigilance. Last week we saw talks progress, albeit at a slow pace, and the trade envoys now head to Washington this week to see what measures can be taken in order to avoid the tariff deadline looming on March 1st. 

At present, there is no definitive schedule for trade talks this week but given the diminishing timeline to strike a short-term compromise I would be expecting more headlines over the coming days. More on this as the week progresses.

Central bank speakers trump historical minutes...

This week we have the FOMC and ECB minutes out on Wednesday and Thursday. For the former, it will be interesting to see the depth of discussion about domestic and external risks as well as decisions on the best process for the Fed's balance sheet. Meanwhile, for the ECB it's a slightly different story where we await to see how confident the Bank is despite the recent weakness in economic data and on-going political issues experienced across several nations at present.

All this aside, it is actually the speakers schedule which I think will contain much more insight as to the current context given the dated nature of the minutes. With this is mind, the Fed has several speakers lined up on Friday with ECB President Mario Draghi also speaking at the end of the week. 

For me these events will potentially provide needed clarity as to the latest policy thinking and to get you fully armed you can refer to the crib sheet below which allocates a hawk/dove score to each FOMC member, a critical piece of preparation needed to interpret their speeches effectively.

You can access more in-depth analysis in the morning briefing accessible HERE.

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TECHNICAL OVERVIEW - Sam North (@snorth19)  

S&P 500 futures

Following on from last week’s analysis on the S&P, we have now broken and closed above the 200 DMA, so from a technical point of view I see 2800 and the trend-line getting tested quite quickly.

From a medium/longer term perspective that would be a great area to take profit and should we see a strong reaction the bears would be interested to see a break below the the moving average and the trend-line from the 4th January lows where we have had three tests already. My view is we continue to grind higher, eventually getting the break of 2800 and then retest the lows we took out from the October 10th sell-off seen across all global equity markets.

GBPUSD futures

I said last week that 1.2860 was massive for the bulls to protect and despite a little break below, they defended with all their might and we are now almost 1 point above. The failure to close the week below that level will be significant short-term and I see a drift higher. However, this has been a relatively tricky market to predict and it will take one positive or negative Brexit headline to really change things up.

Gold futures

Unfortunately, we didn’t quite get a full test of the 1300 handle last week, which I was waiting for – but the previous support we had on the 7th February has worked good enough for the Gold buyers. For those bulls, the high of the year is the main target with the May 11th 2018 high as a double resistance. If we get a close above there on a day/week then why can’t we get back to the overall high for 2018? I think from a technical point of view, you would feel more comfortable getting short if we close below 1300. For a new trade I would wait for this mini range to break either way.

WTI crude futures

The trend-lines in Oil really are great at the moment. The trend-line posted last week, along with the $53 handle worked great initially as resistance before turning to support and since then we have continued to push higher to a new high for the year.

Next key level for me would be around the $58 handle. We last tested that point on November 16th as a strong resistance. For the bears, a close below the previous high of the year and $55 might start getting traders excited again for a sell-off.

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