The Week Ahead

Previous week: 20 February 2017 – 24 February 2017

UK CPI y/y—14 February 2017 

UK’s CPI continues to move northwards by another two tenths of one percent from 1.6% to 1.8% on expectation of 1.9%. Most of the inflation is imported because of the drop in value of the British Pound.

US CPI m/m—15 February 2017

With a +0.6% rise in CPI m/m on the expectation of +0.3% for the month of January, it puts CPI year on year at +2.5%. At 2.5% it is well and truly above the Fed’s target of 2% annual inflation. Previous month number was +0.3%.

Core CPI m/m (excluding food and energy) rose by +0.3% on expectation of +0.2%. Previous month was +0.2%. On an annual basis, core CPI rose from 2.2% to 2.3% which is nicely north of the target 2% set by the Fed.

US Crude oil Inventories—Wednesday 15 February 2017

Crude inventories came in at +9.5 million barrels. The rig count rose another 6 from 591 to 597.

http://www.economist.com/news/leaders/21635472-economics-oil-have-changed-some-businesses-will-go-bust-market-will-be

http://www.zerohedge.com/news/2017-02-17/permian-panic-continues-rig-counts-rise-amid-record-glut-crude

 

Coming week: 13 February 2017 – 17 February 2017

FOMC Meeting Minutes—Thursday 23 February 2017 3am

Probably a non-event because there was absolutely no expectation that interest rates would be raised in the previous meeting in January. Well, Yellen during her testimony a few days ago said March rate hike is on the table and that increased the implied probability of March rate hike.

Crude Inventories—Friday 24 February 2017 

Will we have another large build in crude inventories in the coming week? The fight between the Sheikhs and Shale continues.

 

Trade Ideas

NZD/USD short?

The Reserve Bank of New Zealand mentioned that their currency is too strong and would want to see it drop in value. The reason for a lower currency value is for sustainable and balance economic growth and to generate some inflation.

http://www.rbnz.govt.nz/news/2017/02/official-cash-rate-unchanged-at-1-75-percent

The daily chart showed that NZD/USD has broken support at 0.7230. The next logical support zone comes in at 0.7000.

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If it comes back up to 0.7230 (which doesn’t seem likely though), it would be a good opportunity to go short.

WTI short?

Whilst the OPEC nations agree to cut production which led to a rise in oil prices to $54 a barrel, the American opportunists decided to repay the compliments by restarting their oil rigs. This week, the Baker Hughes US rig count continued marching northwards. It increased by 6 from 591 to 597. Crude oil inventories in US continued to rise by +9.527 million barrels this week.

http://www.investing.com/economic-calendar/baker-hughes-u.s.-rig-count-1652

https://www.investing.com/economic-calendar/eia-crude-oil-inventories-75

When looking at the weekly chart of WTI, we see that it is having trouble breaking through the $54. When focusing at the last 11 weekly candlesticks, we see that they are small candlesticks indicating a contraction in volatility which was akin to the 8 weeks of consolidation in price of oil in the middle of 2016. During that period of time, we see that there were many dojis and pinbars with upper and lower wicks where prices whipsawed up and down in a narrow range. With the current period of sideways consolidation, understanding the fundamentals of oil will come in handy when coming up with an opinion.

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When looking at the daily chart of WTI, we see that oil is taking support at around $51 and selling off at resistance at $54. At the moment, oil is trending sideways. My opinion is to go short at $54 and setting target at $51. Another opinion could be to go short at $54 to hold out for a bigger move down to trendline support at $43.

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It is advisable to wait for some bearishness in the daily chart in the coming week before selling oil short.

http://www.economist.com/news/leaders/21635472-economics-oil-have-changed-some-businesses-will-go-bust-market-will-be

Copper long?

On the daily chart, copper has broken out of its ascending triangle and now testing the support (broken resistance) at $2.70. The last candlestick is a doji at support which may indicate a reversal back upwards.

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When looking at the monthly chart of copper, we see that $3.00 is a very strong resistance zone.

Risking 5 cents by buying at $2.71 and targeting a 29 cent move up to $3.00 would almost give almost 6x Reward to Risk ratio.

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Gold long?

When looking at the daily chart of gold, we see that gold is building a support base at $1220-$1230.

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The last candlestick on the weekly chart is a bullish pinbar which indicates more upside potential for gold, targeting $1250 and then $1300. Be patient and wait for gold to come back down to around $1220 before going long.

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Weekly Videos

Peter Schiff talks about CPI and the Fed.

Ray Dalio, founder of the largest hedge fund in the world (Bridgewater Associates AUM at US$150 billion) explaining how the economy works.

 

 

 

 

 

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