A Week of Misses

THE WEEK

Sterling was the big story this week. The week and month started with Mrs. Theresa May, British PM, announcing a timetable for Brexit, causing GBP to slide down all week after last week’s stability. At this point greater certainty over the Brexit process will continue to hurt Sterling.

Early on Tuesday, the RBA rate hold reversed Mondays AUDUSD rise which then went into decline all week, closing 73 pips on the week. NZDUSD declined all week after another GDT miss at 1405GMT (-3.0% vs 1.7%) taking AUDNZD above 1.06 for the first time in 3 weeks. But Tuesday’s big event was a fast $40 (3.05%) drop in Gold, started possibly by a sovereign sell, but then accelerated as the $1300 psychological round point was breached. This fade continued for the rest of the week, and metal had lost 4.6% by the Friday close.

SPX followed gold down, shedding 22 points (over 1%), although unlike gold it recovered all this ground the next day symptomatic of its 30 point week long range.

The gold drop also saw a sharp uptick in EURUSD although this only lasted until Wednesday mornings, when it continued to repeat the downward pattern it had done earlier in the week. This was not a simple flight from USD though, as USDJPY continued to rise steadily throughout the day, lagging the Oil rally perfectly.

On Wednesday the NIFTY duly reversed following our amazingly accurate template . Importantly It had an inside week, only ranging 200 points, and did not react to US and UK events. There was little other important news for indices except that DAX completed its Deutsche Bank inspired recovery ready for. Friday’s NFP.

GOLD NFP

However, without warning, a black swan flew in during Friday’s Asian session. At 2307GMT Thursday, an already battered GBPUSD was hit by some Asian trader, or more likely, their algo, selling the pair down by 6% to $1.1841 in minutes. It recovered 4.5% of that drop within an hour – a trading opportunity we sadly missed – but the damage had been done, and volatility continued. It faded again to a genuine low of $1.2227 in the morning, and finished the week at 480 pips (3.72%) lower.
After that, this month’s NFP could be seen as an anti-climax. All our NFP fractals strongly projected a miss (156k vs 175k) and invoked our now favourite NFP Gold play which fits neatly into a broader historical outlook. USD behaved more logically than equities and faded against JPY and EUR, reversing the week’s trend as a rate hike looked less likely. However SPX repeated yet another ‘Screw(B)all by spiking to around Tuesday’s high, before repeating that day’s action almost exactly, returning to roughly the pre-NFP point, with a small fade on the bell.
Oil continued its steady rise all week, following last week’s OPEC production cuts, rising 6% to a four month high of $50.74 by Friday morning, but giving up nearly half of that to close back under the psychological $50 level. However, one beneficiary of the GBP and Oil activity was the FTSE100. It has heavy oil weighting, and most of its companies have large USD revenues. (I will refer to this at Friday’s Investor Show as we reveal some exciting analysis in a new FTSE page) As GBP behaved just as it did after Brexit, so did the FTSE, helped of course by the price of oil. It rose 200 points (2.9%) on Monday and Tuesday, only giving up a quarter of that to profit-taking.


NEXT WEEK

The second Clinton/Trump debate will probably define Monday, and watching MXN in the Asian session may provide clues. If German data at 0600GMT misses badly, we might see a breach of last week’s support of 10455. A miss on the ZEW survey on Tuesday 0900GMT would give a second excuse for that.
Otherwise Wednesday is the big day, with FOMC minutes at 1800GMT. We will be following our usual fractal on our analysis pages. Traders will be looking for hints of a rate hike after Friday’s slight miss on NFP.
There is the first EU Extraordinary Economic Summit for over a year on Thursday, but unless something ‘extraordinary’ comes out of it, the FOMC remarks should still have a lingering effect when China CPI is published at 0130GMT Friday.
Retail sales at 1230GMT and Consumer Sentiment at 1400GMT may will also affect Friday’s market, as may possibly a speech by Janet Yellen at 1600GMT, although coming two days after the Fed minutes, that is unlikely.

We should be back to full trading this week except for Friday when I will speaking twice at the London Investor show. There is still time to book your free ticket by clicking on this link

http://www.eventdata.co.uk/Forms/Default.aspx?FormRef=LISA6Visitor

and using the voucher code MATRIXTRADE. Also all attendees to my presentation will get a nice surprise.

TRADING

Despite distractions, we made +818.8 points (+7.36%) on closed trades, and are showing +654.3 points (7.29%) on trades still running based on Friday’s closing prices (mark-to-market). After deducting last week’s mark-to-market, this gives us a creditable net total for the week of 962.3 points (+7.06%), particularly as there were virtually no trades on Wednesday and Thursday due to handling subscription launch hiccups. As a result of the launch we missed a few good trading opportunities.

This brings our total since we started on 3 June to +12767.0 points (97.28%). Particular highlights on the week were long EURGBP and USDJPY trades opened last month which crystallised 813 points.


Ed Matts
Founder, Matrix Trade