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Japanese Data Injects Life | Dollar Bearish Bets At Record High Since 2013 | Sterling And Oil Struggles

Japan Overwhelms While China Underwhelms
Global Arena Looks At Trump Temper
Bearish Bets At A Record Level Since 2013
No Hope For Sterling Bounce
Oil Lower After OPEC Supply Spikes

Japan Overwhelms While China Underwhelms

Investors in Europe are tracking the gains over in Asia and they are more optimistic due to the strong Q2 GDP data out of the Japanese economy. The Japanese economy grew at an annualised rate of 4 percent during the second quarter. The number is really encouraging if we compare this to the country’s performance of the last year. However, not all economic data out of Asia was stellar. The Chinese factory output number fell short of consensus with a reading of 6.4%. The Chinese retail sales number was also underwhelming and missed the forecast of 10.8 percent. The number came in at 10.4%.

Global Arena Looks At Trump Temper

On the global stage, it is the strong rhetoric of the US which is going to keep investors jittery. North Korea is known for making foolish statements and this isn’t new for investors. On the contrary, it is President Trump’s statements like ‘fire and fury’ which traders are incapable to digest. The volatility index has shown that traders would like to take a full leverage of the lower insurance policy to hedge their risk. Although, the premium of the insurance policy in this instance, the price of the VIX index, has moved up substantially. In fact, last week, the index had the biggest weekly advance (5.48%) since November 4.

Bearish Bets At A Record Level Since 2013

Speculators are still out for blood when it comes to the dollar. Hedge funds are piling on big bets as they do see the price of the dollar index still moving lower. The economic data is persistently weakening and this lays down the foundation for their thesis to go short on the dollar. The US core CPI number was vile. The inflation has deteriorated further and the question is for how long can you still say that it is transitory only? Traders are not buying this ideology and they want the Fed to hold on to their next roll of dice. The FOMC minutes may not still change (which are due later this week) and a fail to acknowledge the fact that the inflation issues are something which deserves attention rather than a label of transitory, could make the dollar more vulnerable. However, before we get to the latest flavour of the FOMC minutes, investors will have the US retail sales data to chew first (due on Tuesday). Natural wisdom will ask for more improvement in the July figure as the US wages have shown some strength but a failure of this message would mean more trouble for the dollar bulls.

No Hope For Sterling Bounce

Brexit is going to come back under the spotlight towards the end of this month when both sides will look to make more progress. The three major thorny points: Brexit bill, rights for EU- and British citizens and no border between Ireland and the U.K. would make traders nervous. The solution is not easy and both sides are not going to change their stance. Stubbornness would only create more volatility and odds would skew for more downward pressure for the Sterling especially against the Euro.

The daily chart of the sterling-dollar pair is looking much weaker because we are making lower lows and lower highs which confirm the bulls are not convinced that the price could move up. In order for us to have a clearer indication of bull strength, we need the price to break the high of 1.3164 (Aug 4th high)

Oil Lower After OPEC Supply Spikes

The oil price is struggling to remain in the positive territory. Traders would like to have a firm signal which would suggest that the oil market is balanced and there is no more supply glut. The demand continues to grow however it still requires more help before it can outstrip the supply. The IEA report established that the fundamentals are shifting which would continue to stem the bullish sentiment, however, the revision by the agency from 1.4 million barrels per day to 1.5 million barrels is not ground breaking.

If you look at the supply equation, Nigeria and Libya are continuously adding to the top line number for the OPEC production. The figure augmented by 173K barrels in July and the total production of 32.9 marked the highest number since the production cut agreement. It is something which traders are going to keep a close eye on because it makes the compliance issue immensely sensitive.

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