CALENDAR HIGHLIGHTS:
Monday: CN Holiday, SP Unemployment Rate, IT CPI, EU Sentix Investor Confidence, PPI, UK Construction PMI, US Factory Orders, ISM NY Business Conditions, ECB's Mersch, US Earnings: Alphabet
Tuesday: CN Holiday, AU Retail Sales, Trade Balance, RBA Rate Decision, JN 10-yr Govt Bond Auction, IR/SP/IT/FR/GE/EU Services PMI, SP Consumer Confidence, EU Retail Sales, UK Services PMI, BRC Retail Sales Monitor, Markit Services PMI, IBD/TIPP Economic Optimism, ISM Non-Manufacturing PMI, 3-yr Note Auction, US Weekly API Inventories, CA Trade Balance, US President Trump's delayed State of Union address, UK Earnings: BP
Wednesday: CN Holiday, GE Factory Orders, Building Permits, Housing Starts, GDP, Retail Sales, Core PCE Prices, Durable Goods Orders, Non-Farm Productivity, Unit Labour Costs, Weekly DoE Inventories, Federal Budget Balance, 10-yr Note Auction, CA Building Permits, Ivey PMI, NZ GDT Price Index, Employment Change, RBA Lowe, BoC Lane, Fed's Quarles speak, UK/EU Earnings: GlaxoSmithKline, Daimler
Thursday: CN Holiday, AU NAB Business Confidence, JN 30-yr Govt Bond Auction, Leading Index, GE Trade Balance, Industrial Production, FR Trade Balance, 10-yr Govt Bond Auction, SP Industrial Production, 3/5/10-yr Govt Bond Auction, IT Retail Sales, ECB Economic Bulletin, UK Halifax House Price Index, BoE Rate Decision & Quarterly Inflation Report, US Weekly Jobless Claims, Consumer Credit, Fed's Powell, Clarida, ECB's Mersch speak, US Earnings: Twitter
Friday: CN Holiday, JN Current Account, AU RBA Monetary Policy Statement, FR Non-Farm Payrolls, FR/IT Industrial Production, US Wholesale Inventories, WASDE Report, Baker Hughes Rig Count, CA Employment Change, Unemployment Rate, Housing Starts
Macro overview...
A calm start to the week which is a reflection of the economic calendar ahead and macro stories in play. Important then following a jam-packed week that the reset button is hit, and the coming days are viewed with fresh eyes.
From a practical point of view, China is closed all week for Lunar New Year, as too are other major markets in the region such as Hong Kong and Singapore. As such, volumes overnight will be much lighter than normal and importantly our expectation is that any meaningful progression in trade talks between the US and China will likely be put on ice until the mainland returns next week.
From a broader context, sentiment is still being driven by the commitment from the Fed to be "patient" in the rate policy and balance sheet approach. This clear move to a dovish stance has resulted in the S&P 500 putting in its best January performance since 1987, with analysts at JPMorgan over the weekend releasing a report suggesting that the Fed pivot may shake up the timing of the investment cycle and that 2020 might not be a year to think about a recession. It's hard to disagree with their view as if the Fed is less spooked by full employment and more tolerant of an inflation overshoot then will we move back to the Yellen era of "gradual and cautious" policy deployed within a performing US economy.
Finally, the Bank of England have their interest meeting this Thursday which includes the Quarterly Inflation Report (QIR). Usually this is an important announcement but given the high degree of uncertainty surrounding the unresolved issues on Brexit I see the Bank's forward-looking guidance as largely irrelevant. As such, apart from short-term volatility at the moment of release I would not be looking for this event to change the near-term direction of GBP.
The latest from No. 10 is that Theresa May will seek a "pragmatic solution" to the parliamentary process, but with Europe remaining of a non-negotiating stance over the back stop I think this week has the propensity to be fairly quiet until pressure ratchets up next week into the Valentine's deadline for another meaningful vote top be held.
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)
A Technical Look at the Charts…
S&P 500 Futures
As long as we can stay above the recent Trend-line break then I remain bullish for US equities. A slow start to the week will be expected and it would not be a surprise to see a 4th negative Monday in a row. Targets to the upside would be the 200 DMA and the 4th test of the trend-line and the 2800 level. Oil price, trade developments and FED talk remain the main drivers of this market and unless they turn negative, I see a slow grind higher.
Gold Futures
Once we broke and closed above the 1235 level it was a pretty straight forward Long to the 1300 handle. The recent push to the 11th May highs might now be a short-term top as we enter a week-long holiday in China. 1308 and 1300 would be targets to the downside which should offer a good technical level of support. If we were to close below 1300 I wouldn’t want to be long anymore and could see a quick move back down to the 24th January low.
WTI Crude Oil Futures
A positive finish on Friday makes me favour the upside still but there is still some key resistance points it needs to clear. The 21st and 16th November would be the obvious points to mark up before we could reverse 50% of the 2018 high to low. As long as we push higher I would still be looking for some CAD strength against some pairs and the S&P to keep pushing on. I would only change that view if we break the upward trend-line but don’t see that being tested soon should we close above the 21st November high any day this week.
GBPUSD Futures
A tricky market to predict short-term, what with all the Brexit noise. For me, if I was not in the market, I would be waiting to see what happens around the rectangle. You have some potential trend-line tests and retests as well as a previous level of resistance turned support in the mix. With no new developments I see it holding but should we get a negative headline out, a break below could see 1.2866 quite quickly. A 20th September target for the bulls would be appropriate over the medium term should we find more support this week.
Elsewhere I am looking for potential shorts on AUD and NZD against the Dollar if they are to break technical trend-lines but both are still a fair way from offering that opportunity. The EURUSD is hard to call and is stuck in a range that doesn’t interest me too much. If you have any questions – feel free to message me on Twitter @snorth19
Sam North - Associate
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