Market outlook 17 January 2017

17 January 2017, 11:54
Vlad Brykin
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Market snapshot

South Africa

  • The JSE All Share Index closed up 0.69% at 53 158
  • IMF expects SA’s economy to expand by 0.8% in 2017
  • Rand is trading at R13.55 to the US Dollar
  • Rand is trading at R14.44 to the Euro
  • Rand is trading at R16.41 to the British Pound

Global

  • UK FTSE 100 Index closed down -0.15% at 7 327
  • US equity markets: S&P, DJ and NASDAQ all closed for Martin Luther King holiday
  • UK bosses more upbeat on growth than a year ago
  • Asian markets are mixed in morning trade
  • India’s Nifty Index is down -0.06% at 8,408 this morning
  • Nigerian Stock exchange closed up 0.18% at 26 374
  • Theresa May delivers Brexit speech

Company Snapshots

  • Ford admits Kugas’ cooling units faulty
  • Market applauds Foschini group’s 14.5% sales growth
  • Hugo Boss gets boost in China
  • Rolls-Royce to pay 671m pounds to settle bribery probes
  • Carlyle to buy Global Credit Ratings, Africa’s leading rating agency

Commodities

  • Gold is up 0.79% at $1,212
  • Platinum is up 0.92% at $992
  • Brent Crude is down -0.45% $55.61

 

Outlook for the week ahead:

For the week 16 – 20 January 2017 we can expect the following:

  • Central banks:

On Wednesday, the Federal Reserve Chair Janet Yellen is scheduled to speak to the Commonwealth Club in San Francisco on goals of monetary policies and how Federal Reserve pursues them. There is a Q&A round after the speech. New York Fed President Dudley is scheduled to speak on Tuesday and Harker on Friday. Bank of Canada will announce interest rate decision on Wednesday. European Central Bank is scheduled to announce monetary policy on Thursday.

  • Davos:

Economists, central bankers, global leaders, and big shot corporates from about 70 countries will gather in Davos for annual World Economic Forum. Chinese President Xi Jinping will open this year’s meeting. The event is scheduled from January 17th to 20th.

  • US earnings:

Investors would turn their focus onto fourth quarter earnings details from the companies listed in S&P 500. This week, big banks like the Goldman Sachs, Morgan Stanley, and Citi are scheduled to release their earnings details. Netflix and IBM are also scheduled to announce.

  • Trump inauguration:

Donald Trump will be formally inaugurated to the office as the 45th president of the United States on January 20th. There is nothing unusual about the event but with Donald Trump scheduled to speak, you can never know.

 

Geopolitics:

We’re giving this section a skip for the week. It’s always better to start the year off on a good foot. Apart from Trump’s inauguration and the Theresa May speech, we’re watching Obama’s exit speech, held Wednesday. Instead, here is a COT report for FX markets:

Shorts increased:

  • The Mexican peso registered the biggest increase in net short positions among its peers last week. The net-short positions increased by 6,140 contracts to -71.8K contracts.
  • The net short positions in the Canadian dollar got increased by 4,064 contracts to -7.9K contracts.
  • The net short position in the New Zealand dollar rose by 2,547 contracts to -14K contracts.
  • Speculators added to their net shorts by 1,089 contracts in British pound; thus bringing the net position to -65.8K contracts.
  • Swiss franc registered a marginal increase in the net short positions last week and by 807 contracts that brought the net position to -14.2K contracts.
  • Australian dollar shorts rose by 592 contracts to 38K contracts.

Shorts decreased:

  • The Japanese yen saw the biggest decrease in the net-short positions, where net-shorts decreased by 6,925 contracts -79.8K contracts.
  • The net short position in the euro declined by 4,233 contracts to -65.8 K contracts.

 

Positions:

EUR/USD

Markets seem to have ignored Eurozone’s mixed trade balance figures and European Central Bank Governing Council member Francois Villeroy comments, as the focus remains on Thursday’s ECB monetary policy meeting. Trump did not disclose details at his Wednesday news conference on his plans for tax cuts, looser regulation and more infrastructure spending, which sparked euro sell-off following his presidential win on Nov. 8. Much will depend on Trump and his plans for the U.S. economy after his inauguration on Friday. But overall dollar is expected to be stronger this year due to higher U.S. interest rates is set to cap euro’s gains.

To the upside, the immediate resistance can be seen at 1.0611, a break above this level would expose the pair to next resistance level at 1.0650. A further break above the weekly trend line at 1.06330 will change direction to a bullish momentum.
To the downside, immediate support can be seen at 1.0561, a break below at this level will open the door towards next level at 1.0500.

Resistance Levels

R1:  1.0611 (38.2% Retracement level)

R2: 1.0650 (50% Retracement level)

R3: 1.0692 (61.8% Retracement level)

Support Levels

S1: 1.0561 (38.2% Retracement level)

S2: 1.0500 (Psychological levels)

S3: 1.0452

 

 

GBP/USD

Sterling attempted a minor recovery, after declining to a 3-month low below the 1.2000 handle on expectations that PM May speech scheduled on Tuesday will trigger fresh signal of a Hard Brexit. Moreover, the recovery appears fragile as this week’s U.K. Supreme Court hearing on the Article 50 challenge, where the government is widely expected to lose continues to weigh on market sentiment.

Any close above 1.2220 will take the pair to next level till 1.2328 (30- day EMA)/ 1.24325 (Jan 5 High). On the lower side, the near-term support stands at 1.1980 and any break below will drag it down till 1.19048 Brexit low.

Resistance levels

R1:  1.2220

R2: 1.2328 (30- day EMA)

R3: 1.24325 (Jan 5 High).

Support Levels

S1: 1.20873

S2: 1.1980

S3: 1.9048 (Brexit low)

 

 

Gold

Gold prices advanced, extending gains for the sixth straight day, as concerns over Britain’s exit from the European Union and U.S. policy uncertainty ahead of President-elect Donald Trump’s inauguration weighed on investor sentiment.

Net position long and increasing

The long positions rose last week, along with the metals’ price.  The net long position increased by 12,932 contracts to +109.5K contracts.

Gold has broken the 1200.00 barrier and bias remains bullish.

Resistance levels

R1:  1242.00

R2: 1284.00 (61.8% retracement level)

R3: 1304.00 (downwards trend line)

Support Levels

S1: 1200.00 (psychological level)

S2: 1182.00

S3: 1143.00

 

 

 

 

 

 

 



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