Ben Robson – The week of 2nd-6th December 2019

The VIX (volatility index) has been making headlines over the weekend as it has receded to record lows in tandem with US equities reaching record highs and many instances of record lows in interest rates.

The debate currently centres on whether this is a negative sign, i.e. it forewarns a period of volatility or whether we should continue to embrace the notion that equity markets are set to rally endlessly.

Crude oil’s abrupt retracement of 5% on Friday makes me think that volatility in equity markets is underpriced and that market contagion can rapidly spread from one market to another, that consumer sanguinity is misguided and that markets are not nearly as rosy as current elevated levels suggest that they are! We must always be cognizant of the fact that markets are unpredictable; in other words, “aware” of the risks.

The first week of any month is always a revealing time for macro traders and there are plenty of newsworthy data releases this week which can potentially offer up some excellent trading opportunities. I for one shall be following closely the Canadian dollar and the currency combinations of USDCAD and AUDCAD in particular, as there are several data announcements that could affect these pairs.

ECB president Christine Lagarde will testify to the European Parliament on Monday. Also on Monday, manufacturing data from Canada and the US will be released. Canadian RBC Manufacturing PMI is expected to have risen in November to read 52.6 from October’s 51.2. Similarly, ISM Manufacturing numbers in the US are expected to improve to 49.6 from October’s 48.3

Tuesday morning and the Reserve bank of Australia is expected to keep interest rates on hold at 0.75%. Australian Q3 GDP is expected to have risen to 1.7% from 1.4% when it is released on Wednesday morning. A majority of analysts are expecting The Bank of Canada Interest rate decision on Wednesday to be one of “unchanged” at 1.75%.

For me, this one is in the balance! I would not be at all surprised if the BOC cuts by 0.25%! It’s definitely been talked about. The oil price will be a concern. And the BOC has been one of the few central banks that has avoided large scale cuts in interest rates. One and done? We’ll see!

USA figures on Wednesday afternoon are ADP employment numbers, expected to improve to +140,000 new jobs created from +125,000 last month and ISM services which is likely to come in at 54.5, slightly lighter than last month’s 54.7.
Friday’s main data comes in the form of US Non-Farm Payrolls, a Canadian employment report and US University of Michigan consumer sentiment index.

Expectations are for a net change in employment of 190,000 new jobs created in the US with the unemployment rate stable at 3.6%. Canadian employment is expected to fall marginally by 1,800 jobs with the unemployment rate remaining at 5.5%. The University of Michigan index released later in the afternoon is considered a timely indicator of consumer confidence. November’s figure is expected to improve to 97 from last month’s 96.8.

Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.


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