It seems that President Trump’s ‘Art of the Deal’ and usage of tariffs has finally produced an example of a success, with Mexico coming up with a way to handle the border and immigration enforcement that pleased Washington.
I was a bit perplexed by this tariff implementation, as under the new NAFTA (USMCA) Mexico is set out to be the real winner. Mexico will produce the items that once were imported from China and impacted by tariffs. We will see supply chains and investment in factories and infrastructure in Mexico to facilitate this. In the end, this turned out to be a non-event, and a way for President Trump to get Mexico to get series about border issues. We cannot deny that there are no issues at the border, and credit has to be given where credit is due. This was a win for President Trump.
Markets continued to move higher as I have discussed throughout this blog and my social media. The new mandate for central banks is to keep assets propped. Bad economic data is stock market positive as the market factors a higher probability of rate cuts. We have worse than expected jobs data this weak both on private payrolls and non-farm payrolls. Expect rate cuts. The Fed can be patient and do nothing, but I think they are in a corner now where if they do NOT cut rates, the markets will sell off.
Speaking about crazy monetary policy theory, and central banks running out of tools in the tool box, ECB head Mario Draghi alluded to the potential cut of the deposit rate…which is already at -0.4%…again, all the ECB can do is go more negative. They have killed their bond market, and are to follow in the footsteps of the Bank of Japan.
A lot of Chinese data is coming out this week, so many eyes will be on this as a way to gauge the impact of US tariffs.
- Sunday: JPY Q1 GDP.
- Tuesday: GBP ILO Employment Rate.
- Wednesday: China CPI (May), Draghi Speech, US CPI ex food and energy(May).
- Thursday: AUD Employment Data (May), Swiss Rate Decision, EUR Harmonized CPI (May).
- Friday: US Retail Sales Group (May).
Not going to post the US equity charts this week as they continue to have the same strategy. The macro environment, especially the Fed likely cutting rates, will drive stocks higher. Just await for swings to develop.
I really like this chart of the Hang Seng. A market that has not quite moved together with other equity markets…well the Chinese markets have not in general. If you have the time, I highly recommend watching the Real Vision interview with Kyle Bass who speaks about his big trade for 2019 being Hong Kong related. While many are betting on Canada and Australia to fall due to Real Estate issues, many are ignoring Hong Kong which has the biggest Real Estate bubble, and is ignored because of their stability the past 30 years. That interview can be see here.
Onto the Hang Seng, I like the nice downtrend we have displayed, and am awaiting some signs of a bottoming pattern. It seems we are in the process of making it here. I will be awaiting for the break and close above the 27200 level which takes out the lower high swing.
The German Dax is showing signs of making its first swing in the uptrend (higher low). The blue box depicts this potential higher low, but remember, for this to be confirmed, we need the higher high which we get with a break and close above 12055.
The precious metals have had quite the run. Silver here broke through the downtrend and closed above the important flip zone of 14.80. I like Silver above this zone, but remember, we may easily re-test this zone before moving higher to the 15.50 zone.
Gold is also looking good, however there is a BIG zone approaching. That zone is the 1360 zone which has been tested 6 times in the past. If this breaks, then it adds a lot of confluence to my geopolitical and economic thesis. I still think we will get a period where the US Dollar and Gold moves in tandem upwards together. Whether that is happening now we will have to wait and see. Gold also gets buoyed with the impending rate cuts. With rates being cut on the short end, the real rates are pretty much negative factoring inflation meaning that Gold is attractive.
The Copper chart is showing signs of a basing pattern. This is after a nice downtrend. I will be watching Copper here for a break and close above 2.6630 zone. Copper will be influenced by the talks of a recession… or by a US-China deal becoming more likely.
There will be a few Pound pairs this week, and we shall start with the Cable. Not much has to be said, head and shoulders pattern. Just awaiting the break and close above the neckline.
Watching USDJPY here as it is holding a long term support zone. We have a nice downtrend which has now created a range pattern. We can see where the sellers are with the large red candle. A break above this would take out a lot of stop losses and be bullish. The zone I am watching is 108.50.
Like this daily chart of AUDNZD, a chart I have spoken about for the past few weeks. Finally got the break and the retest. We are at the 1.05 zone, so I will wait to see how this pair opens on Monday and perhaps wait for the next few candle closes.
TRYJPY is a pair that does not show up too often, but really like what I am seeing here. Showing a transition from an uptrend to a downtrend. We seem to be making our first lower high here. Awaiting for a close below 18.50.
EURCHF is showing some choppiness, but the pattern is there. A nice downtrend, with now a ranging pattern, and it seems like we will be making our first higher low. Awaiting a break and close above 1.1200.
Really like this pattern on GBPAUD. Had a nice downtrend, and showing signs of bottoming at an important support zone. Awaiting for a close above 1.8250. It is probable that this pair could make some sort of pattern around here before taking off so be patient.
GBPCHF another good looking Pound pair. If you zoom out on the chart, we are at an important flip zone. Like the basing pattern here, and now just awaiting for the break of 1.2640.