Amplify Weekly Strategy: 4th-8th March 2019

Amplify Weekly Strategy: 4th-8th March 2019


Monday: AU Building Approvals, Business Inventories, CN Annual People's Political Consultative Conference, SP Unemployment Change, UK Construction PMI, EU Sentix Investor Confidence, PPI, US ISM - NY Business Conditions, Construction Spending, 

Tuesday: AU RBA Interest Rate Decision, Current Account, CN Caixin Services PMI, CN Annual People's Political Consultative Conference and National People's Congress, JN 10-yr Govt Bond Auction, Services PMI, IR/SP/IT/FR/GE/EU/UK Service PMI, SP Consumer Confidence, IT GDP, EU Retail Sales, US NFIB Small Business Optimism, US Service PMI, IBD/TIPP Economic Optimism, ISM Non-Manufacturing PMI, New Home Sales, Federal Budget Balance, Weekly API Inventories, CA Ivey PMI, NZ GDT Price Index, RBA Governor Lowe, Fed's Kashkari, Barkin speak

Wednesday: AU GDP, UK 5-yr Govt Bond Auction, CN Annual People's Political Consultative Conference and National People's Congress, US ADP Non-Farm Employment Change, Trade Balance, US Weekly DoE Inventories, CA BoC Interest Rate Decision, Trade Balance, Ivey PMI, Fed's Williams, Mester speak

Thursday: AU Trade Balance, Retail Sales, JN 30-yr Govt Bond Auction, CN Annual People's Political Consultative Conference and National People's Congress, UK Halifax House Prices, RICS House Price Balance, IT Retail Sales, SP 3/5/10-yr Govt Bond Auction, EU GDP, Employment Change, ECB Interest Rate Decision & Press Conference, US Challenger Job Cuts, Weekly Jobless Claims, Non-Farm Productivity, Unit Labour Costs, Fed's Brainard speaks

Friday: JN GDP, CN Trade Balance, CN Annual People's Political Consultative Conference and National People's Congress, GE Factory Orders, FR Trade Balance, FR/SP/IT Industrial Production, Italian PPI, UK Inflation Expectations, US Non-Farm Payrolls, Average Hourly Earnings, Unemployment Rate, Building Permits, Housing Starts, WASDE Report, Baker Hughes Rig Count, CA Employment Change, Unemployment Rate, Fed's Powell speaks

Saturday: CN CPI/PPI

MACRO OVERVIEW - Anthony Cheung (@AWMCheung)

US/China trade deal update...

Markets start the week on the front foot following the latest news overnight that the US and China are close to a trade deal that could lift most or all US tariffs as long as Beijing follows through on pledges ranging from better protecting IP rights to buying significant amount of American goods, according to Bloomberg contacts.

How long this positive sentiment can last is somewhat debatable, as although the talks appear to be heading in the right direction we have been here many times before. By this, I refer to when leaked updates from the press have prompted a quick pricing in which inevitable results in a wicked pull-back once the official response from authorities is one of less definitive nature. 

Interesting, the latest development has come the day before China's annual meeting of parliament begins this week, an event used to pass major bills, approve budget and endorse personnel nominations, so watch out for any explicit reference to the trade talks and also wording around the country's growth targets.

Path of least resistance...

The usual flurry of Brexit headlines was seen over the weekend and the fact GBP remains largely unmoved reflects both the lack of substance to the news in addition to investors lack of appetite to get involved at this point in time. The latter is largely a by-product of the fact that the next major date in the calendar is March 12th, to see if UK PM May can bring forward a successful deal to parliament.

The summary of news in recent days appears to support the idea that the risk of a 'no Brexit' at all has created a new willingness to support the Prime Minister's proposal, granted that she can indeed obtain a concession on the legally binding matter of the Northern Irish backstop (something to watch out for towards the end of the week). This situation leaves us with a rather compelling case to have a long bias on cable underlined by either the government's deal is backed by parliament and we move toward the transition phase, or 'no deal' option is removed next week and the chance of a second referendum increases over a pro-longed extension to the negotiations, of which both scenarios which would be supportive of the GBP. 

Recommend clients get long at market (1.3240) with a target of 1.4000 and a stop at 1.3100 Morgan Stanley - 4th March 2019

How downbeat have the ECB become?...

The ECB hold their latest interest announcement this Thursday where we expect them to leave rates on hold and refrain from making any hasty decisions to quell the recent weakness in economic data. 

The part of the event likely to capture most attention will be the update to the Bank's growth and inflation outlook and to what degree has the situation deteriorated in the minds of the governing council. Here's a look at the latest Bloomberg survey to add context to how much growth expectations may be downgraded since the last guidance provided in December.

You can access a full market briefing for the week ahead HERE.

TECHNICAL OVERVIEW - Sam North (@snorth19)  

S&P 500 futures

Despite the Dow closing red for the week, I think sentiment still remains to the upside from a technical point of view. For the S&P 500 to continue the push higher, 2825 (17th October high) would have to break and then I would expect to see momentum pick up towards a re-test of the 8th October low. 

For the Dow Jones, the 8th October low has now been retested twice and should we get a break of that key level – you have got to favour a quicker move to the All-Time-Highs from October 3rd. If you wanted to see these markets reverse or consolidate for a period of time, then waiting for the trend-line in the S&P to break may be the way forward. However, with the way things are at the moment, unless there was a substantially negative development in trade talks, the only way is up in my opinion.

Gold futures

Dollar strength on Friday and an overnight trend-line break on Thursday night were the reasons we are now trading where we are. Looking back at 2018 moves, a key push to the downside happened following a break of a similar looking trend-line so I would be wary about getting in the way of this. Should we break the retest of the trend-line from the high of last year, then I would be watching closely for 1280-1275 to be breached. 

The key data points in this week have the potential to swing Gold from intraday highs to lows but with the technical break to the downside we saw on Thursday/Friday, I would favour looking for selling opportunities. To get long, I would want to see 1275-1280 hold firm or see further Dovish comments from the FED replicating Donald Trump’s comments from the weekend.

WTI crude futures

$58 is the level to be aware of on the Futures. It really holds the key to any more potential upside. To the downside, I would be focusing on $55 holding firm or I would not be surprised to see a quicker move lower towards $52.50. 

For this week, I would obviously be watching out for any more Donald Trump Tweets and then for any OPEC retaliation. This could provide the short-term volatility to ignite a move in either direction but if the President remains quiet on the Oil price front – a break above $58 towards $60 is the trade I favour. However, the strength or weakness of the Dollar is something that I would focus a bit on as well following Friday’s move lower in Dollar priced commodities. 

Have a great week ahead.

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