Archives of “September 2020” month

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CAD/JPY was the biggest FX mover this week

  
Analysis, Forex

NZD was also strong

The yen was the top performer this week while the kiwi lagged. On its face, that fits in nicely with the ‘risk off’ theme but the old risk on/off paradigm hasn’t applied for a long time. Neck-and-neck with the yen as the top performer was the New Zealand dollar.
NZD was also strong
Taking a look at CAD/JPY, there isn’t much in the weekly chart. It was the second week of declines but it’s still comfortably within the range since June.
Do note that the pair failed twice at 82.00 and that points to a downside bias.
CADJPY

CFTC commitments of traders: Traders trim some of the EUR longs

  
Analysis, Forex

Weekly commitments of traders data for the week ending September 15, 2020

  • EUR long 179K vs 198K long last week. Longs decreased by 19K
  • GBP long 2K vs 13k long last week. Longs decreased by 11K
  • JPY long 23K vs 22K long last week. Longs increased by 1K
  • CHF long 12K vs 12K long last week. No change in net speculative position
  • AUD long 16K vs 2K short last week. Longs increased by 18K
  • NZD long 3K vs 5K long last week. Longs decreased by 2K
  • CAD short 17k vs 17K short last week. No change in net speculative position

Although the EUR longs remain high at 179K, the net speculative position decreased by 19K.

The other big change was in the AUD. The net long position moved up 18K to a net positive positin of 16K from short 2K.
The GBP long moved from 13K to 2K.

China has recovered but it’s the wrong kind of recovery

  
Analysis, Economy

Industrial production is driving the rebound

Industrial production is driving the rebound
China is an interesting counter-point to many ideas about the global economy right now. It’s essentially a COVID-free country and an entirely open economy.
From a distance, it’s recovered in a big way.
But when you drill down, it’s not quite as strong as it seems. Retail sales are down 8.6% y/y in the first 8 months of the year and were just 0.5% y/y in August.
It’s not the consumer driving the recovery.
Contrast that with:
  • Industrial production +5.6%
  • Fixed asset investment +4.16%
  • Trade surplus +19.3%
That’s not a sustainable recovery and it’s not the consumer-led economy that China’s been trying to build for the past 5 years.
China has gone back to the old playbook to stimulate growth. Perhaps that was the right thing to do but the slow consumer recovery even in a COVID-free country is worrisome.
It also sets up domestic problems for China down the road, as the FT highlights today:

China’s “recovery”, in other words, is largely an exacerbation of the problems that have long been recognised by Beijing. It is a supply-side recovery in an economy that urgently needs more domestic demand but that has found it politically very hard to manage the wealth transfers that it requires.

This recovery isn’t sustainable without a substantial transformation of the economy, and unless Beijing moves quickly to redistribute domestic income, it will require either slower growth abroad or an eventual reversal of domestic growth once Chinese debt can no longer rise fast enough to hide the domestic demand problem

Major indices close in the red. S&P and NASDAQ post the 3rd straight losing week

  
Analysis, US Market

S&P leads the way to the downside today

The major US indices are closing the red. The S&P and NASDAQ are down for the 2nd straight day and for the 3rd week in a row. All 11 sectors of the S&P closed lower. The S&P was the weakest of the majors.

The final numbers are showing:
  • Tthe S&P index fell -37.68 points or -1.12% to 3319.33
  • The NASDAQ index fell -116.99 points or -1.07% to 10793.28
  • The Dow industrial average fell 244.69 points or -0.88% to 27657.29

For the week, each of the major indices close lower:

  • S&P index fell -0.65%
  • NASDAQ index fell -0.56%
  • Dow industrial average fell -0.03%
Year to date, the NASDAQ index continues to lead by a wide margin. The changes are showing
  • S&P index, +2.74%
  • NASDAQ index +20.29%
  • Dow industrial average -3.09%
Some of the bigger winners today included:
  • US steel, +11.23%
  • Zoom, +6.26%
  • Tesla, +4.29%
  • Crowdstrike Holdings, +2.23%
  • Twitter, +2.01%
  • CVS health, +1.99%
  • Rite Aid, +1.67%
  • J&J, +1.36%
  • Target, +0.91%
  • Deere and Company, +0.91%
  • Slack, +0.91%
  • Tencent, +0.48%
Some of the bigger losers today included:
  • Beyond Meat, -5.2%
  • Boeing, -3.85%
  • Intuitive Surgical, -3.8%
  • First Solar, -3.7%
  • Qualcomm, -3.65%
  • United Airlines, -3.58%
  • Apple, -3.33%
  • Delta Air Lines, -3.27%
  • American Airlines, -3.01%
  • Boston Scientific, -2.97%

European shares end the session lower. Spain’s Ibex leads the way lower

  
Analysis, Global Indices

German DAX tries to move back to positive on the year, but fall short this week

The major European indices are ending the session lower. The declines the downside are being led by Spain’s Ibex which fell around 2%. Madrid is enacting mobility restrictions on fears of Covid resurfacing. The German DAX tried to move back positive for the year but fell short with today’s declines.

The provisional closes are showing:
  • German DAX, -0.4%
  • France’s CAC, -1.0%
  • UK’s FTSE 100, -0.5%
  • Spain’s Ibex, -2.0%
  • Italy’s FTSE MIB, -0.9%
For the week,
  • German DAX, -0.6%
  • France’s CAC, -0.8%
  • UK’s FTSE 100, -0.2%
  • Spain’s Ibex, unchanged
  • Italy’s FTSE MIB -1.2%

Could Trump start another trade war this fall?

  
  Analysis

The China-US dynamic isn’t improving

The China-US dynamic isn't improving

As tensions between the U.S. and China rise, President Donald Trump has signed an executive order that will effectively ban Chinese social networking app TikTok from the U.S. market, unless it is bought by a U.S. buyer.

President Trump stressed that there will be no extension to the TikTok deadline set for September 15th, despite the fact that Treasury Secretary Steven Munchin told CNBC on Monday that the deadline for the TikTok deal was September 20th, not the 15th, as previously announced.

So what’s the reason behind Trump’s executive order?

Well, some say it’s largely due to national security concerns, data security and privacy – despite the fact that TikTok doesn’t breach any national security or privacy laws.

The Trump administration will survey the “technical partnership” bargain struck among Oracle and ByteDance, the Chinese group that owns TikTok, before deciding on whether to endorse the arrangement or not.

Meanwhile, President Trump has focused on the need for an instalment to be made to the US Treasury as a component of any arrangement, a remarkable interest that the White House has yet to clarify.

Officials acquainted with the arrangement said the understanding excluded any instalments to the US Treasury.

A senior US official said there were no current conversations about an instalment except that the arrangement would result in economic benefits. In addition, an individual associated with the discussions added that the two organizations would invest vigorously in the U.S. and create a huge number of jobs.

Oracle is noticeably not referring to the agreement as either a sale or acquisition. Maybe it’s a joint venture? Or a vendor agreement?

Oracle Corp. has a history of cooperating with the US government. This makes its partnership with TikTok a key move during the wave of Chinese restrictions going through the White House and Congress.

Oracle has apparently won the competition to take over TikTok’s U.S. operations. TikTok’s Chinese owner ByteDance has rejected Microsoft’s antagonist bid.

A deal between ByteDance and Oracle is appearing to be more of a corporate restructuring rather than the direct sale Microsoft had suggested.

According to “the Wall Street Journal” Oracle has been adopted as a “trusted tech partner”. This is unlike an outright sale, which implies that Oracle will be assisting to manage TikTok’s operations with its individual cloud technologies.

Yet, the arrangement will require the endorsement of both U.S. and Chinese authorities. U.S. authorities will need to be certain that TikTok’s client information will not find its way back to Beijing, while China will need to accept the regulations on AI imposed on it by the U.S. authorities.

The acquisition will help Oracle get important demographic data and information. This information can help Oracle get its foot in the door of new businesses. For instance, the organization could enter the online media space with the assistance of TikTok, thereby opening ways to more information.

The Chinese yuan rose to its highest point since the news came out in May. Oracle’s shares traded as much as 17% higher in early trading before the markets opened in New York on Monday, after closing at $57 on Friday.

The Committee on Foreign Investment in the United States “CFIUS” will audit the offer this week “and afterwards we will make a proposal to the President and survey it with him.”

Whether it is bullying or preserving national interests, will the Chinese company give in to President Trump?

Only time will tell…

Trade Safe.

USDJPY down for the 5th consecutive day

  
Analysis, Forex

Sellers push toward July lows but does find some stall

The USDJPY had a 59 pip trading range last week.  This week, the non trend has seen a march lower. The pair is down for the 5th day in a row today. The range is 188 pips.
Sellers push toward July lows but does find some stall
Looking at the hourly chart, the pair did try to extend above a topside channel trend line in the Asian session but did run into a swing area from Wednesday and Thursday (see red numbered circles) and rotated back to the downside.  The pair moved below the low from yesterday at 104.516. That is now close risk for shorts, as is the old trend line at 104.57 (see chart above).  Stay below keeps the sellers firmly in control. A move above would muddy the intraday waters a bit technically.
Drilling to the daily chart, the price low today reached 104.267. That got within 8-9 pips of the swing low from July at 104.18.  A move below that level would take the pair to the lowest level since March 12.  The level did attract some early buyers as risk could be defined and limited.
USDJPY on the daily chart
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