Trading with point and figure

Good Moaning,


EG - against all my expectations I found my position in the money at .8940 so I took it - a thundering +4 av. Splendid results:p

It being Friday and numbers day as well, I'm not going to get back in until after the w/e
 

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2838 minor supp/being tested now
2840 lined up
2846 area..bull test
2832 ..bigger supp area...if ya can get it
 
Turkey hogs the limelight with TRY meltdown on busy day for major
statistics; digesting Japan Q4 GDP ahead of UK Q2 GDP and rash of monthly
indicators, US and Scandinavian CPI, Canada Labour data; Chicago Fed Evans
hawkish shift also worthy of note

- Turkey: ECB warning on Eurozone bank exposure to Turkey unleashes tidal
wave - key question is whether this precipitates contagion and selling
of 'good assets' to cover losses

- UK Q2 GDP: expected to rebound modestly, paced by Services & Personal
Consumption, but will it last, notwithstanding Brexit effects

- US CPI: average increase expected, some upside risks from Apparel, Autos
and usual OER and medical care pressures; Food & Energy impact seen
neutral

- Canada: solid employment gain seen, Unemployment Rate set to drop back

- Turkish Lira Spot and TRY Interest Rate market overview

..........................................................................

********************
** EVENTS PREVIEW **
********************

In statistical terms the week ends with a proverbial bang, though that may be drowned out by the Turkish Lira's implosion in early trade (see chart and overview of TRY rates markets), as the ECB concerns on French, Spanish & Italian banks' exposure to Turkey (see FT: https://on.ft.com/2vuMV8s ) unleashed a tidal wave of selling, the big question now is when does this turn into contagion risk related selling of good assets to cover losses, a point which we have warned about on many an occasion this year. Once the much better than expected provisional Q2 GDP and PPI from Japan have been digested, the UK moves front and centre with a deluge of monthly business activity data and its provisional Q2 GDP. Ahead of that there are French Industrial Production, Norwegian and Swedish CPI, while the afternoon has US CPI, Canadian labour data and India's Industrial Production. The RBA's quarterly Statement on Monetary Policy puts the RBA in the RBNZ's dovish camp, even if the RBA in contrast to the RBNZ is upbeat on growth prospects, though less so on labour market prospects. The afternoon also brings the US's World Agricultural Supply and Demand Estimates (WASDE) report, which cwill be closely watched in the dual contexts of US / China trade tensions, and the impact of abnormally hot weather across much of the Northern Hemisphere. The week ahead is not short on data highlights either: for the US Retail Sales, Industrial Production, Q2 Unit Labour Costs and Housing Starts; China also has Retail Sales, Industrial Production, along with FAI; the UK looks to the full gamut of inflation measures, labour data and Retail Sales, while Germany along with a host of other EU countries publish Q2 GDP, while Canada focuses on CPI. Last but not least attention needs to be paid to the transformation of one of the FOMC's arch doves, Chicago Fed President Evans, to a quasi-hawk as he suggested that the Fed policy's stance may need to be restrictive, i.e. beyond the its neutral rate, in order to rein in growth - see https://www.bloomberg.com/amp/news/...need-higher-rates-to-restrict-economic-growth

** U.K. - Q2 GDP, Index of Services, Industrial Production, Trade & Construction Output **
- As 'deadlines' on Brexit negotiations get ever closer, the run of UK economic data is largely relegated to the observation 'but what happens in the event of a deal or no deal?' Be that as it may, the BoE's rate hike was predicated on the assumption that the run of Q2 data confirms that the Q1 stall was transitory, even if the Q2 pick-up fell short of expectations; today and next week's run of data will provide the details. GDP is expected at 0.4%, that would inch the y/y rate back up to 1.3% from 1.2%, with growth expected to be paced by a better contribution from Services (0.6% q/q) and a modest pick-up in Private Consumption (0.4% q/q from Q1 0.2%). By contrast the monthly data on Industrial Production are anticipated to confirm that this sector was a drag on GDP, though June data are seen confirming a further rebound in Manufacturing (median 0.3% m/m vs. May 0.4% and April -1.3%), suggesting improving momentum going into Q3, and the warm weather is likely to have boosted utilities output. The ever noisy and erratic Construction Output is seen down 0.4% m/m, presumably a reactive correction to May's 2.9% m/m jump (April flat). Last but least the Trade data (which are expected to be broadly neutral for GDP) are forecast a fractionally lower, but still large £-11.95 Bln deficit vs. May £-12.4 Bln, though overall posting gains in exports and imports on the quarter. The overall question, regardless of the Brexit related uncertainty, is whether the uptick in overall Q2 growth has been no more than a correction to Q1, which will not be sustained in H2, as some surveys on consumer spending appear to suggest.

** U.S.A. - July CPI **
- CPI is projected to rise 0.2% on both headline and core, which would leave headline and core yr/yr rates unchanged at 2.9% and 2.3% y/y, the former being the highest since Q1 2012. June's data missed in headline terms due to a big drag from Energy (-0.3% m/m) and Apparel (-0.9% m/m), the latter also weighing on the core, which yet again saw a totally anomalous fall in Airline Fares (-0.9% m/m vs. May -1.9% and April -2.7%, leaving the y/y down 5.9%, which is preposterous given that N. America Jet Fuel were up >50% y/y). While Jet Fuel Prices were down in July (-1.6% m/m), this still leaves the y/y rate at 34.0%), it seems improbable that this total disconnect can be sustained. The pointers from yesterday's CPI suggest food & energy may be a drag at the margin, though gasoline prices were steady over the month, and the read across is often a poor one, though the PPI for Personal Consumption goods was down 0.1% m/m. As ever Housing (i.e. OER) will continue to exercise some upward pressure, and a close eye will have to be kept as ever on Medical Care, which saw a 0.4% m/m rise in June. Anecdotal evidence from the auto sector suggests incentives on new vehicles were reduced for the first time in more than four years, which in theory should exercise some upward pressure, though the idiocy of hedonics may counteract that pressure in practice. But on balance, forecasts assume that once base effects are accounted for, the upward pressure on prices looks to be very modest.

** Canada - July Unemployment **
- In broad terms, Canadian labour demand has been broadly robust for most of this year, with June's 31.8K rebound after small declines in April & May (total -8.6K) underlining that profile. Today's data is expected to see a 'military medium' 17K rise in Employment, with the Unemployment Rate seen dropping back to 5.9% from June's rise to 6.0%, predicated on a rise in the participation rate to 65.4% from 65.3%. Average Earnings will however be key in respect of BoC policy, with a marginal rise to 3.6% y/y from June's 3.5% seen, though this continues to be somewhat flattered by base effects, which will turn adverse in the final 5 months of the year.

========================== ** THE DAY AHEAD ** ===========================
From Marc Ostwald
 
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