Summary
The final trading week for October saw some very positive data out of America with a strong improvement seen in manufacturing and services, home price gains (driven mostly by limited inventory) an increase in single-family home sales and an increase in pending home sales. A positive trade deficit showing higher imports than exports, higher employment cost index for civilian, private, state and government workers and a higher GDP with an increase in personal disposable income.
Technically a lot of sideways trading last week with the exception of EURUSD, USDCHF and USDJPY. The COT report indicates an increase in long and short positions on all pairs except USDJPY, USDCHF and AUDUSD.
The week closed off with a announcement that the FBI will be releasing the full and complete facts about the Clinton e-mails though Clinton followed up to say she is confident this will not impact her or the election on the 8 November in any way. With Friday being the last trading day of the month and Dxy at WM4, the market’s response to the news could have been exacerbated by month end flows and end of week profit taking. Traders should pay attention to how Tokyo reacts to the news at market open on Sunday.

Technical Summary
The Dxy closed higher for the week @ 12196, EURUSD closed higher for the week @ 1.09833, USDCHF closed higher for the week @ 0.98758, GBPUSD closed lower for the week @ 1.21914, USDJPY closed higher for the week @ 104.718, USDCAD closed higher for the week @ 1.33850, AUDUSD closed relatively unchanged for the week @ 0.75989 and NZDUSD closed relatively unchanged for the week @ 0.71584.
Oil closed lower for the week @ $49.259 per barrel and Gold closed higher for the week @ $1,274.88 per ounce.

Commitment of Traders Report as of Tuesday 25 October Forex.Today COT Report
EURUSD: Increase in buyers, increase in sellers, further decrease in the weekly close price and net non-commercial positions. Bearish (net non-commercial positions below waterline)
GBPUSD: Slight increase in buyers, no real change to sellers, no real change in weekly close price and slight uptick in net non-commercial positions. Bearish (net non-commercial position below waterline)
USDJPY: Increase in buyers, no real change to sellers, uptick in net non-commercial positions and weekly close price. Bearish (net non-commercial position above waterline)
USDCHF: No real change to buyers, further increase to sellers, further decrease in net non-commercial positions, further increase in weekly close price. Bullish (net non-commercial position below waterline)
AUDUSD: Increase in buyers, decrease in sellers, uptick in net non-commercial positions and relatively unchanged weekly close price. Bullish (net non-commercial position above waterline)
NZDUSD: No real change to buyers or sellers, no real change to net non-commercial positions and a slight decrease in weekly close price. Neutral (net non-commercial position at waterline)
USDCAD: Increase in buyers, increase in sellers, no change to net non-commercial positions and a slight uptick in weekly close price. Bullish (net non-commercial position below waterline)

U.S. manufacturers record strongest upturn in business conditions for 12 months in October www.markiteconomics.com
– Headline PMI rises from 51.5 to 53.2 in October
– Output and new order growth hit one-year peaks
– Manufacturers report fastest expansion of input buying since June 2015
– Input cost inflation accelerates to its strongest for almost two years

“Manufacturing showed further signs of pulling out of the malaise seen earlier in the year, starting the fourth quarter on a solid footing. Both output and new orders are rising at the fastest rates for a year amid increasingly widespread optimism that demand will pick up again after the presidential election, which has been commonly cited as a key factor that has subdued spending and investment in recent months. There are also signs that the drag from cost-cutting policies of deliberate inventory reduction is moving into reverse. Inventory-building should therefore provide an extra boost to the economy in the fourth quarter. “Weak export growth, attributable to the strong dollar, and lacklustre hiring remain big areas of disappointment, and highlight an ongoing dependency on domestic demand and a need to keep labour costs low amid a still-uncertain economic and political outlook.” Chris Williamson, Chief Business Economist at IHS Markit.

Service sector activity expands at fastest pace since November 2015 www.markiteconomics.com
– Business activity increases at a robust and accelerated pace in October
– New order volumes rise at quickest rate seen so far in 2016
– Service providers report strongest business optimism since August 2015

“The latest survey data reveal a decisive shift in growth momentum across the U.S. service sector, which mirrors the more robust manufacturing performance seen during October. Taken together, the ‘flash’ PMIs suggest that the economy is growing at an annualized rate of around 2% at the start of the fourth quarter. Service providers experienced the fastest upturn in new business volumes since late-2015, which survey respondents linked to improving domestic economic conditions and signs of greater business investment in particular. That said, job creation remained relatively subdued in October, with firms reporting cautious hiring plans and efforts to alleviate pressures on margins. October’s survey findings contained positive signs for near-term growth prospects, with service sector companies the most upbeat about the business outlook since August 2015. Moreover, the month to-month rise in this index was one of the largest seen over the past two years.” Tim Moore, Senior Economist at IHS Markit.

Home price gains continues in August according to the S&P Corelogic Caseshiller Indices www.spice-indices.com
“Supported by continued moderate economic growth, home prices extended recent gains. All 20 cities saw prices higher than a year earlier with 10 enjoying larger annual gains than last month. The seasonally adjusted month-over-month data showed that home prices in 14 cities were higher in August than in July. Other housing data including sales of existing single family homes, measures of housing affordability, and permits for new construction also point to a reasonably healthy housing market. With the national home price index almost surpassing the peak set 10 years ago, one question is how the housing recovery compares with the stock market recovery. Since the last recession ended in June 2009, the stock market as measured by the S&P 500 rose 136% to the end of August while home prices are up 23%. However, home prices did not reach bottom until February 2012, almost three years later. Using the 2012 date as the starting point, home prices are up 38% compared to 59% for stocks. While the stock market recovery has been greater than the rebound in home prices, the value of Americans’ homes at about $22.3 trillion is slightly larger than the value of stocks and mutual funds at $21.2 trillion.” ” David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

The Advance International Trade in Goods Deficit Decreased in September 2016
Advance International Trade in Goods: Exports of goods for September more than August exports. Imports of goods for September less than August imports.
Advance Wholesale Inventories: Adjusted for seasonal variations but not for price changes, up 0.2 percent (±0.4 percent) from August 2016, and virtually unchanged (±1.9 percent) from September 2015
Advance Retail Inventories: Adjusted for seasonal variations but not for price changes, up 0.3 percent (±0.2 percent) from August 2016, and were up 4.0 percent (±0.5 percent) from September 2015.

New Residential Sales in September 2016 www.census.gov
– Sales of new single-family houses in September 2016 3.1 percent (±16.2%)* above the revised August rate and 29.8 percent (±23.4%) above the September 2015 estimate

Durable Goods Manufacturers’ Shipments, Inventories and Orders September 2016 www.census.gov
New Orders: New orders for manufactured durable goods in September decreased 0.1 percent. Transportation equipment drove the decrease
Shipments: Shipments of manufactured durable goods in September increased 0.8 percent. Transportation equipment drove the increase
Unfilled Orders: Unfilled orders for manufactured durable goods in September decreased 0.4 percent. Transportation equipment drove the decrease
Inventories: Inventories of manufactured durable goods in September increased 0.1 percent. Machinery led the increase

Unemployment Insurance Weekly Claims Continues Down Trend www.dol.gov
In the week ending October 22, the advance figure for seasonally adjusted initial claims was 258,000, a decrease of 3,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 260,000 to 261,000. The 4-week moving average was 253,000, an increase of 1,000 from the previous week’s revised average. The previous week’s average was revised up by 250 from 251,750 to 252,000. There were no special factors impacting this week’s initial claims. This marks 86 consecutive weeks of initial claims below 300,000, the longest streak since 1970.

Pending Home Sales Edge Up in September www.realtor.org
Pending home sales shifted higher in September following August’s notable dip and are now at their fifth highest level over the past year, according to the National Association of Realtors®. Increases in the South and West outgained declines in the Northeast and Midwest.
“Buyer demand is holding up impressively well this fall with Realtors® reporting much stronger foot traffic compared to a year ago 1, although depressed inventory levels are keeping home prices elevated in most of the country, steady job gains and growing evidence that wages are finally starting to tick up are encouraging more households to consider buying a home. The one major predicament in the housing market is without a doubt the painfully low levels of housing inventory in much of the country, it’s leading to home prices outpacing wages, properties selling a lot quicker than a year ago 2 and the home search for many prospective buyers being highly competitive and drawn out because of a shortage of listings at affordable prices.” Lawrence Yun, NAR chief economist.

Employment Cost Index – September 2016 http://www.bls.gov/news.release/eci.nr0.htm
Civilian Workers: Compensation costs for civilian workers increased 2.3 percent for the 12-month period ending in September 2016
Private Industry Workers: Compensation costs for private industry workers increased 2.3 percent over the year, higher than the September 2015 increase of 1.9 percent.
State and Local Government Workers: Compensation costs for state and local government workers increased 2.6 percent for the 12-month period ending in September 2016.

Gross Domestic Product: Third Quarter 2016 (Advance Estimate) www.bea.gov
– Real gross domestic product increased at an annual rate of 2.9 percent in the third quarter of 2016 vs. 1.4 percent in the second quarter (Revision to be released on November 29, 2016.)
– The price index for gross domestic purchases increased 1.6 percent in the third quarter
– Disposable personal income increased 3.6 percent, in the third quarter, compared with an increase of 4.1 percent, in the second
– Personal saving was $800.6 billion in the third quarter, compared with $793.5 billion in the second

Surveys of Consumers chief economist, Richard Curtin University Of Michigan
The Sentiment Index slipped in October to the same low recorded last September and to the lowest level since October 2014. The October decline was due to less favorable prospects for the national economy, with half of all consumers anticipating an economic downturn sometime in the next five years for the first time since October 2014. Objectively, the probability of a downturn during the next five years is far from zero-this would be the longest expansion in 150 years if it lasted just over half of the five year horizon. Nonetheless, the October rise may simply reflect a temporary bout of uncertainty caused by the election. Prospects for renewed spending gains will depend on continued growth in jobs and wages as well as low inflation and interest rates. The small rise in interest rates now expected in December will have a minimal impact on spending. Along with small increases in interest rates, consumers also anticipate a mild slowdown in job creation that is likely to prevent any further declines in the national unemployment rate. To be sure, these changes are all anticipated to be small during the year ahead. Overall, real personal consumption expenditures can be expected to increase by 2.5% through mid 2017.

Clinton calls on FBI to release ‘full and complete facts’ of email review CNN
Late Friday afternoon a news release hit the wires announcing that the FBI will be releasing the full and complete facts about the Clinton e-mails. While we did see Dollar weakness we must also recognize that the USDollar was at WM4 and that this is where traders take profit. Also keep in mind that it was technically the last trading day of the month so one should consider that the market’s response to the news could have been exacerbated by month end flows and end of week profit taking. Traders should pay attention to how Tokyo reacts to the news at market open on Sunday. The chance of a December rate hike as per the Fed Watch Tool is 73.9%.

DXY Daily

On Thursday Dollar strength saw price break through, and close above, the resistance at MR3. Price closed at support. 21 clearly above the 55 with a strong and fast angle of separation. Next level of resistance eyed at January 2016 highs with lower levels of support highlighted in the green zones below price

DXY H4

Price came off the 55 EMA earlier in the week though still made a higher high, albeit slightly above the previous high. Price came off of WM4 and closed at support. While the 21 is above the 55, price coming off the 55 indicates a slow down in trend which was caused by resistance at MR3. We get new monthly and weekly pivot points next week which will give traders a good idea of the range for November as well as market support and resistance.

US 10Y T-Note Daily

Notice how closely correlated the 10Y T-Note daily chart is to the Dxy daily chart. When bonds go down the yield of the 10Y T Note goes up. A decrease in bond prices and an increase in yield is correlated, in current market conditions, with the likelihood of a rate hike.

US 10Y T-Note H4

For the week overall bond prices were falling after bears sold bonds at WM3 and then again at WPP with a target of WM1/ WS1. Price reached WS3 where we saw a rise that many sites are saying is due to the Clinton news released on Friday evening. Note again that while the market may have reacted to this news, price was at a profit taking area and it was the end of the week and the end of the month. A continued decline in the 10Y T-Note will indicate a continued rise in the yield and therefore an indication as to the likelihood of a rate hike by the FOMC.

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