FOMO Friday: Kiwi Keeps On Truckin'

NZDUSD Rally ContinuesAs we wrap up another week I’ve been doing the usual rounds, chatting with traders about their winners and losers and, always more interestingly, the ones that got away. In terms of the big moves that traders are kicking themselves over this week, in the FX space anyway, it’s the ongoing rally in NZDUSD that has been capturing the most attention. While bears have been patiently waiting for the rally to reverse, NZD kept on trucking and clocked a more than 2% rally this week, extending the gains of the prior week. So, as ever, if you caught this move – well done! And if not? There’s always next week. Let’s take a look at what caused this move and why it was a great trade.What Caused the Move?USD WeaknessThe main driver behind the rally in NZDUSD this week has been the sell off in USD. With the greenback cratering on the back of Powell’s lacklustre comments at Jackson Hole, higher yielding currencies like NZD and AUD have been the main beneficiaries. The market was looking for Powell to offer up a clear tapering signal over the coming months. However, with the Fed chairman refraining from doing so, citing the ongoing uncertainty in the outlook, traders were seen quickly unwinding USD upside bets.Across the week, a series of weaker-than-expected data points has seen the greenback falling further lower as the ADP release and the employment component of the manufacturing PMI both raised fears of a weaker-than-expected NFP result later today. While that remains to be seen, for now, the Dollar is continuing to head lower, allowing for risk assets, risk currencies such as NZD to continue higher in the near term.Hawkish RBNZ ExpectationsAdded to the mix is the fact that the RBNZ is among the most hawkish of the G10 central banks. With the RBNZ having announced an end to QE as of this month and given a clear sign that it intends to hike rates as soon as possible, NZD holds a lot of upside prospects which should keep NZDUSD supported over the coming weeks, provided there are no upside USD fireworks on the back of today’s data. So that’s the fundamental backdrop, let’s now take a look at the technical picture.Technical ViewsNZDUSDThe rebound off the .6791 level has seen price breaking through several key resistance areas; the .6933 mark, the local bearish trend line and now the .7110 level. Price is now testing the bear channel top and with indicators turned firmly bullish, the focus is on a breakout and continuation towards the .7315 level next.

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The stockmarket melt-up just keeps going

Levels of public debt not seen since World War II; a labour shortage; fast-rising inflation; more new Covid-19 variants; small businesses suffering from supply crunches; chaos in Afghanistan; rising mutterings about inequality; anti-wealth and anti-market policies in China; ridiculously high equity valuations in the US. It’s a lot for markets to cope with. You’d think they’d wobble some, but no. Instead, the melt-up just keeps going – and America’s S&P 500 index just keeps hitting record highs. Should you worry?

There are stories you can tell to make yourself feel a bit better (stockmarkets are nothing more than a sum of stories). You could perhaps argue that US earnings estimates are rising so fast that it makes everything look kind of OK. S&P 500 stocks as a whole beat analysts’ estimates nicely in both the first and second quarters – so everyone is now busy upgrading their forecasts for the year. The higher these go (S&P average forecast operating earnings per share are now at a record high) the less awful valuations look, and the easier it is to justify endlessly rising stockmarkets. 

You could also argue that the Federal Reserve, America's central bank, is clearly very conscious of the stockmarket (maybe too conscious) and will be keeping interest rates so low for so long that if you want an income of any kind, there is no alternative to the stockmarket. You might also note that companies must be feeling pretty optimistic: stock issuance is currently at its highest level ever in the US – “blowing away the last high set in the run up to the Tech Bubble”, say the analysts at asset manager GMO. And this isn’t just about new firms coming to market (the Spacs – special purpose acquisition companies – you have heard so much about). Instead, most new issuance is coming from “seasoned companies”.

Unfortunately, none of these things are quite enough. Analysts have a trying tendency to extrapolate everything – basing forecasts not on actual predictions of the future, but on assumptions that the future will be almost identical to the immediate past. Yardeni Research notes that the average analyst’s estimate of forward earnings for US energy companies is up by 1,558% since last year’s lockdown lows. In lockdown, analysts assumed lockdown forever. Out of lockdown they perhaps assume pent-up demand release forever. The latter is as unlikely now as the former was then. As for issuance, it would be nice to think that it reflected companies being full of brilliant ideas as to productive ways to use the cash. However, it is just as likely, as GMO says, to reflect that “Wall Street knows an eager, price-insensitive buyer when it sees one... when the ducks are quacking, it’s time to feed ’em”. 

And interest rates? It makes some sense to think about markets in relative terms, but at some point absolutes will matter too. When that happens, eager, price-insensitive buyers will be in for a shock. With that in mind, let us bore you again with the suggestion that you bring some of your cash home – to the UK market. The UK is not as cheap as it was, but it is much cheaper than most other markets. If we don’t buy it, private-equity firms will soon own the lot. And we won’t like that.

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The US is in one of the greatest bubbles in financial history

“Today, it is clear to me that this is the most dangerous package of overpriced assets we have ever seen in the US. [Bond guru] Jim Grant would say that we have the most overpriced fixed-income market in the history of man. 

“That, combined with an equity market that can easily lose $5trn or $10trn, depending on the magnitude of the break, is a contender for the highest-priced market in American history.” The result could be “a writedown in perceived wealth that would have no precedent”. 

So wrote Jeremy Grantham, co-founder and chief investment strategist of Boston-based asset management group Grantham, Mayo, Van Otterloo (GMO), a few months ago. It’s a dramatic prediction from a man with a history of getting things right. For instance, he rightly dismissed the 2003-2007 stockmarket rally as “the greatest sucker rally in history”, warned that the housing bubble of the mid-2000s would burst, and turned positive on stocks in March 2009. 

So when we talk on the MoneyWeek podcast (listen to the whole thing here) this great bubble is one of the first things I ask him about. Just how big is it? And – given that the markets have looked expensive for a long time already – how might it end? 

A slow, 12-year build-up

It’s big. This has been one of the longest economic upswings we have ever seen. Take out the Covid-19 “blip” (a quick down and up) and “the long, slow build-up had gone on for 12 years”. At the end of a long upswing such as this, “you’re likely to have very substantial profit margins, and if history repeats itself, investors are likely to consider that the high profit margins will last forever”. 

That’s the first part of making a bubble: “Very strong economics extrapolated into the indefinite future.” The second part is easy money, which we also obviously have in spades. 

Alan Greenspan, former chair of the US Federal Reserve, may have introduced America’s “aggressively pro-asset formula” of cheap money and moral hazard back in the 1990s – but today, rates are the lowest in history and we have just seen the biggest increase in the money supply ever too (a 25% year-on-year rise in the US). 

Things have been pretty stimulative outside the US but in most places this just means being at the “top end of their historical range”. Not so in the US, which has “broken way out” in terms of both government and Federal Reserve stimulus. It’s the same with equity markets. Most are at “merely normally high prices”,  but the US is a candidate for the highest-priced market in its history. 

Big Tech’s extraordinary performance

What makes this worse than a bog-standard bubble? Capitalism, says Grantham, “particularly in the US [which] is a little fat and happy”. The US Department of Justice has allowed industry to become far more monopolistic and concentrated than ever before. But at the same time, companies are less aggressive than they once were. Between the 1960s and the 1990s market share was all that mattered. Now many of the big firms focus on profit margins, using cash flow to do buybacks, for example (something executives love anyway as it works so well with their stock options and is “very low in career risk”). 

Look at profit margins in the US and the rest of the world and again you see the difference. In the rest of the world, profit margins have stayed reasonably high but the US has “crashed up to record highs” with a “fairly astonishing 80% gain over the rest of the world in profits”. Even more astonishing however is the fact that something like 85% of this is accounted for by the huge tech companies. “The performance of [Big Tech] has been extraordinary – there’s been literally nothing like it in history, anywhere.” 

Take Apple, the company with the biggest market value in the world. Last quarter it announced that sales had risen by 50% in the past 12 months. “Give me a break, this is the largest company in the world,” says Grantham. Traditionally, a brilliant year for a company of this size would mean growth of, say, 5%-6%. There is no precedent for this kind of expansion. “One has to admit these are exceptional companies.” 

The secret to America’s success

So here’s an interesting question: why is it that the US has such a dominant share of these great new interesting firms? The answer to that one, says Grantham, is the venture-capital industry. American exceptionalism is not what it was, but one place where it is still very much on the go is here. 

The US has two-thirds of the world’s great research universities, something venture capital really feeds off. It also has the right attitude to risk. Americans “forgive failure, they go back and try again, and they throw money at new ideas, and they’ll do 20 new deals, where the careful Germans will do one. 

“And so, they have many more failures, but when the smoke clears out of the wreckage of the internet, the Amazons, and for a while the AOLs, tend to be American, and they own these great new enterprises. So, I look at [Big Tech] and I say: where did they come from? And the answer is, they all jumped out of the venture capital industry in the last few decades.” 

Still, none of this really justifies the valuations, particularly since the tide may be beginning to turn: note the way in which China has been “bashing its new, special, powerful monopolistic entries”. So what will be the thing that brings this bubble down? 

Where is the pin?

There is no point in looking for a pin, says Grantham. “No one can tell you what the pin was in 1929. We’re not even certain in 2000. It’s more like air leaking out of a balloon. You get to a point of maximum confidence, of maximum leverage, maximum debt, and then the air begins to leak… because tomorrow is a little less optimistic than yesterday.”

There are, however, warning signs. “Before the great bubbles ended in 1929, 1972 and in 2000, in the US, the three great events of the 20th century, there was a very strange period in which, on the upside, the super-risky, super-speculative stocks started to underperform.” 

Think of it in terms of “confidence termites”. They start with the speculative stuff and gradually reach the rest of the market. This time round we are tracking that path “quite nicely”. When Grantham and I spoke (four weeks ago now), the Spac (special purpose acquisition company) index, bitcoin and Tesla were all substantially off their highs. The Biden stimulus and the good vaccine news have pushed this bubble out longer than Grantham ever expected – as has the huge breadth of market participation. In 2000 it also seemed as though everyone was in the market. 

Watch out for the “confidence termites”

“My favourite story, which is completely accurate, was that [in] the local greasy spoon... in the financial district of Boston [there were eight] television sets [and] all but one of them would be showing talking heads from MSNBC and CNN and [the eighth] would be showing replays of the Patriots football team. And a year earlier... eight out of eight were showing the Red Sox.” 

You see something similar today: endless talk about Tesla sales and huge numbers of new traders in the market, all too many of them using options. Grantham reckons the termites will have made it to the rest of the market by the end of the year. 

Where to look now

Oh dear. Is there anywhere safe for investors, I ask? Back in 2000 there were plenty of cheap things around – houses weren’t horribly overpriced, and neither was the bond market; and value stocks were actually cheap. Grantham agrees there is much to worry about if you are looking at the kind of things that get the confidence termites going: the coming of the bezzle (the fraud cases that appear at the end of bubbles); more evidence that this bout of inflation is not transitory; and, in the US in particular, a worsening of the pandemic. 

On the plus side there are some relatively safe havens. One place you really should have some money is in US venture capital. “It’s far and away the most virile part of American capitalism. It has all the ideas. All the best and brightest now come into venture capital, all starting their new firms, as they should.” 

His own Grantham Foundation for the Protection of the Environment has moved its assets to 70% venture capital, with much of that focused on the wall of money heading for decarbonisation. 

There will be huge amounts of money “trying to get into the new ideas... and they will really prosper.” And the established green companies will also be beneficiaries. GMO has had a climate-change fund for the last several years, for example. “It’s doing extremely well. And it will get hurt in the burst, but it’s a global fund. It will go down less. It will come back quicker. It will run further.“ 

Beyond that, note that overall the equity market is not as overdone as bonds and real estate (the UK housing market, he says, is a “humdinger” – see below), so if you stay out of the US, choose carefully and emphasise emerging markets. 

When the US market collapses all markets will temporarily, at least, come down in sympathy (this is a reason to hold some cash so you can pick up the bargains by the way). However, “you will make a respectable return. Not as much as you would like, but a respectable return” over ten or 20 years. GMO’s current forecasts of annualised seven-year returns for various asset classes (see chart above) suggest that the best value is in this area – high starting valuations imply poor long-term returns. (For context, US stocks have returned an annual 6.5% after inflation over the very long term.) 

Grantham would also suggest steering your portfolio towards value stocks, which are “about as cheap as it gets… compared to the other half of the market”. Perhaps buy “the cheaper low-growth stocks in emerging [markets] and carefully-selected other developed countries” (not the US). But whatever you do, do not let yourself believe that everything is fine. It isn’t. This “is a really splendid speculation”, says Grantham, “and of course it will end badly”.

There will be “hell to pay” in the UK property market

“One day there is going to be hell to pay.” That’s Jeremy Grantham’s verdict on the UK property market. Why? Two reasons. First, it is overpriced, and second because while it is possible to get reasonably long fixed-rate mortgages (Nationwide has a five-year deal at just under 1%), in general, “you guys have floating rates, like Canada, Australia, and New Zealand. That means that when rates rise a large number of borrowers will see their monthly payments shoot up.

“Some of those borrowers will turn into forced sellers; given that markets are priced at the margin, prices will crash. In the US it won’t be so bad: we have fixed rates. So, yes, our market will crash and it will be painful, but not nearly as painful as it will be in Britain.” 

What can we do? When it comes to mortgages, “go and get the longest one you can”, says Grantham. If the ten-year offering seems a little more expensive than you would like, “pay up a little” and get it anyway. You may feel as though you are overpaying for a while but that won’t make you wrong. “Everybody feels stupid at the top of the bull market, basically.” Everyone feels they should have taken more risk – leveraged their assets a bit more. 

What usually happens however is that they capitulate and do just that “just in time to get wiped out... The market, in its own way, must have a lot of fun.” However this is not just about the UK. Housing in most of the world is about as bubbly as it has ever been. In the US, prices as a multiple of family income are now higher than they were in the great housing bubble of 2006 and 2007. 

That “in itself is quite amazing”. And remember that when that bubble deflated it took $8trn of “perceived wealth” (“perceived” because the house itself doesn’t change just because its price rises) down with it. The same day of reckoning will come to global markets again. The only thing in the UK’s favour is how slow it is at building houses. Last time round the markets that really cracked – Spain, Ireland and the US – were the ones that built and built. Those that did not (the UK, Australia, and Canada) were not hit so hard. 

However, there is little doubt in Grantham’s mind that we won’t escape so lightly this time. With prices up by 13.2% in the year to June (the data is from the Office for National Statistics – see chart) housing inflation is at a 17-year high. When the crash comes to the UK, says Grantham, it will be a “humdinger”.

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Gold regains some of its shine

Gold prices perked up this week after US Federal Reserve chair Jerome Powell’s Jackson Hole speech. The yellow metal hit $1,820 /oz, a four-week high, on Monday. Powell hinted that US interest-rate hikes were still some way away. Low interest rates and the threat of inflation are good for gold. In sterling terms, gold cost £1,315/oz this week, down by 5% since 1 January. 

The US dollar weakened following Powell’s comments. A weaker dollar is good for gold because the yellow metal is usually priced in dollars. “Gold has gained 4,160% across the last five decades against the dollar”, says Russ Mouldin Shares. Gold bugs spy parallels with the inflationary surge of the 1970s, not least because the US government is again “running welfare programmes… it cannot afford”.  

This year’s global recovery has pushed investors out of gold and into stocks, where they can bank dividends, says Stefan Wagstyl in the Financial Times. If interest rates do rise then “bonds would start generating higher incomes, making gold (and other incomeless assets) less attractive”. It may take another crisis to trigger a big gold rally, as when prices soared to all-time highs last year. But there are certainly plenty of geopolitical tensions to worry about, while “the planned exit from the unprecedented global easy money regime is… fraught with danger”. 

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Covid's Delta variant dents Vietnam’s economic growth

For much of the pandemic, “the globe marvelled” at Vietnam’s “incredibly low Covid-19 infection numbers and negligible death rate”, says William Pesek in Nikkei Asia. Yet governments across Southeast Asia became complacent, assuming that “large-scale vaccination… could wait”. Now, thanks to the Delta strain of Covid-19, the region is suffering from its worst wave of the disease since the pandemic began. Less than 3% of Vietnam’s population is fully vaccinated; much of the country has been placed in lockdown.  

Stocks stay buoyant 

Still, Hanoi has raised its “vaccination ambitions”. The health ministry aims to get 50% of adults jabbed by the end of the year and 70% by the end of March 2022. Investors have a “half-glass-full view”. Bill Stoops of Dragon Capital Group thinks stocks could rise by 10% as vaccination gets going. The benchmark VN index has gained more than 20% since 1 January, but is down by 6% since early July as Delta has taken hold. 

Southeast Asia’s Delta woes are putting new stress on global supply chains, say Jon Emont and Lam Le in The Wall Street Journal. “A gap has formed” between surging goods demand in vaccinated countries and “the capacity of sparsely vaccinated manufacturing countries to meet it”. Closed factories and ports have left multinationals in the “lurch”. Adidas, which sources 28% of its apparel from the country, says most of its Vietnamese suppliers’ factory capacity has been unavailable since mid-July”. That could mean $600m in lost sales during the second half of the year.  

There are also growing concerns about coffee supplies. Vietnam is a leading producer of robusta beans, the variety used in instant coffee. A lockdown in the southern city of Ho Chi Minh is delaying shipments. Global coffee prices had already spiked following drought and frosts in Brazil. Strict movement controls mean that GDP now looks likely to grow by 5% this year, down from a previous forecast of 6.7%, says Chua Han Teng of DBS Bank. It’s not just manufacturers that are hurting. In many places “non-essential businesses and restaurants” have been closed, which is also weighing on the domestic service sector. Still, Vietnam is an outperformer: Vietnam’s economy actually grew last year. That should continue. “Growing interest in Vietnam as a production base” is driving strong foreign investment. The economy is “increasingly integrated into the global electronics value chain”. 

Profits at Vietnamese firms are set to grow by 11% in 2021, says Mary McDougall in Investors’ Chronicle. That compares with 7% for Asia ex-Japan as a whole. A “young, enterprising and large workforce” should mean that it remains one of the world’s fastest growing economies. “For patient investors, Vietnam has great fundamentals.” 

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Global debt pile reaches war-time levels

The world’s governments “have rolled out $16trn of fiscal measures to prevent economic collapse during the pandemic”, says Enda Curran on Bloomberg. That has left us with “war-time era” debt levels. The UK’s government debt-to-GDP ratio is expected to hit 113% in 2026, up from 85.2% pre-pandemic, one of the biggest increases among all advanced economies. Ultra-low interest rates on government bonds – the UK’s ten-year gilt currently yields 0.623% – are keeping these debt levels manageable for now, says James McCormack of credit rating agency Fitch. Yet in the longer-term a “fiscal adjustment” (spending cuts and higher taxes) will probably be needed to get global government finances back on track.  

Climate change will worsen debt dynamics over the coming decades, say Dhara Ranasinghe and Karin Strohecker on Reuters. “While developing countries are inherently more vulnerable to rising sea levels and drought, richer ones will not escape.” A report by index provider FTSE Russell finds that “Malaysia, South Africa, Mexico and even... Italy may default on debt by 2050”. Many nations could also be heading for climate-induced credit downgrades, leading to higher borrowing costs and more onerous national debts. 

As during the 1970s, “the economy looks shaky and society is becoming more fractious”, says Liam Halligan in The Daily Telegraph. “The emerging parallels between contemporary British trends and those weird, dysfunctional years… are stark.” Even the Afghan debacle is reminiscent of “America’s 1975 retreat from Saigon”. By 1976 “a near-bankrupt Britain” was forced to beg the International Monetary Fund for a bailout. This time too, “after years of high borrowing and mass money-printing… a fiscal reckoning... seems inevitable”

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So much for the taper tantrum

The dreaded “taper tantrum” has turned out to be a “taper whimper”, says Will Denyer of Gavekal Research. US Federal Reserve chairman Jerome Powell’s speech at the Jackson Hole conference confirmed plans to cut monetary stimulus later this year. You would expect liquidity-addicted investors to be upset by that prospect, but they took the speech “in their stride”.  

Taper yes, rate hikes no

The Jackson Hole “jamboree” had been “looming over the market for months”, says Katie Martin in the Financial Times. The event often sees a central banker “say something silly” that upsets traders. Powell chose to play it safe, allaying concerns about overly hasty monetary tightening. 

The Fed is currently buying $120bn-worth of US government bonds and mortgage-backed securities (MBS) with printed money every month as part of its emergency response to the pandemic. With the recovery under way it needs to start cutting back (or “tapering”) that support. But it is a treacherous path: in 2013 a similar move by then-chair Ben Bernanke triggered the “taper tantrum”. The resulting turmoil saw bond yields spike and emerging-market stocks sell off. 

Jerome Powell has not repeated Bernanke’s mistakes. He has so far skilfully “avoided miscommunication” of the type that caused the 2013 tantrum, says John Authers on Bloomberg. Stocks rose following the speech; markets had feared Powell might announce a more rapid tightening of monetary policy. Instead, he remained vague on the exact timetable for tapering and made clear that outright interest-rate rises were still a distant prospect. “He managed to couple confirmation that a taper is imminent with reassurance that rake hikes aren’t.” Markets reacted positively. The Nasdaq and S&P 500 indices rose to new record highs. The latter is up by more than 22% so far this year. US government bond yields fell (bond prices move inversely to yields).  

How to talk like a central banker 

Powell’s speech had “something for everyone”, says Lisa Beilfuss in Barron’s. “Hiring is strong but could be better; the Delta variant may or may not be [a] problem.” Every line that hinted at future monetary tightening “was caveated by a reminder of why it isn’t” imminent. The only theme Powell really insisted on was the idea that high inflation is transient. Much now rests on what happens in September, when economists hope reopening schools will ease America’s labour shortages: “the labour shortage is the root of the everything-shortage” that is driving prices higher. The spread of the Delta variant in America may prove a “wild card” that determines whether that happens or not.  

Powell’s speech was an exercise in stalling for time, says Paul Ashworth of Capital Economics. He has resisted pressure from colleagues who want tapering to begin within weeks. We think the Fed will wait until its November meeting “to announce a $15bn reduction in the monthly pace of its Treasury securities purchases and a $7.5bn reduction in MBS purchases”.

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BTCUSD facing Bearish pressure

Price is holding below the ascending trendline support turn resistance, showing a bearish momentum. Price is expected to push down to the 1st support level in line with the 61.8% Fibonacci extension and 50% Fibonacci retracement level. Our bearish bias is further supported by RSI indicator where the chart is seen to be approaching the resistance level and it is kept under the ascending trendline support turn resistance. Alternatively price might push up to 1st Resistance level in line with the 127.2 % Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/btcusd-facing-bearish-pressure"
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Investment Bank Outlook 03-09-2021

Credit AgricoleAsia overnight: Sentiment is stable ahead of the release of the US non-farm payrolls data. While investors in Chinese technology stocks still fret over further regulations, S&P 500 futures and most Asian bourses were trading higher at the time of writing. G10 FX was trading in tight ranges in the Asian session. There was some volatility in the JPY with PM Yoshihide Suga announcing that he will not be running for re[1]election as LDP President and will therefore be resigning as PM in late September and around the LDP Presidential election. The NOK and JPY were the weakest performers in the G10 in the Asian session and the AUD and NZD the strongest performers.USD: QE taper is hard labour, indeed. The Fed’s growing focus on the US labour market outlook has elevated the already important NFP release to new heights on investors’ radar screens. Indeed, recent FOMC speeches have highlighted that the timing of QE taper will likely depend on the US employment outlook as well as the evolution of the pandemic. Ahead of the August NFP, market consensus is for further healthy gains in excess of 700k and a further decline in the UR to a fresh post-pandemic low of 5.2% while our team’s own forecast is for 650k on the headline print. Also today, focus will be on the services ISM and, in particular, its labour market component. The big question remains whether the US employment data will be enough to push the Fed closer to policy normalisation potentially as soon as September. We think that even if the data comes in largely as expected, any Fed decision to taper could still hang very much in the balance ahead of the September meeting given the still considerable range of views at the FOMC and the recent path of the pandemic. Indeed, we think that it would take positive surprises from both the NFP and the ISM today to see the markets front loading their expectations about the timing of policy normalisation. In all, we continue to expect the USD to do well in the run of QE taper in coming months. As before, we prefer to express any bullish USD view via longs vs. the JPY and the CHFCIBC It is NFP time and after this week’s ADP, several forecasters have begun to lower their calls to tonight’s labour report. We, too, have lowered our NFP to 800k from 900k. My thoughts? I shared with couple of macro clients and some agreed payrolls will be weak, may possibly come in under 700k but if the unemployment rate improves plus higher average wage earnings, this could be still upbeat. Don’t trade the headline.FX FlowsUSDJPY tad weaker, especially after the Tokyo fixing. We are not seeing much, guess flows are all out of Japan. First test of the downside should be 109.60, then 109.40 and 109.20, where importers are rumoured to be. Japanese retail accounts who sold above 110.00 have started to collect their shorts and will add to longs beneath 109.50, I think. Several option strikes roll off today, largest at 110.00 for $1.3bn.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-03-09-2021"
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Dollar Marooned at One-Month Low Ahead of Payrolls

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USOil – Weak Dollar, Oil Tests Key Resistance

USOil, Daily

Oil prices rose to a new four week high at 70.39 yesterday as the US Dollar fell to a four week low.  The USDIndex made a low at 92.13 this morning after  the  weekly unemployment claims report was the lowest since the start of the pandemic, at 340,000.

This week, OPEC, led by Russia, agreed  to maintain production capacity of 400,000 barrels per day for October (continued from September) as due to the impact of Covid-19, there are still some factors of economic uncertainty, though we are  starting to see strong fundamentals and renewed demand. The OECD’s crude stockpiles continue to decline, while US crude inventories (EIA) reported a lower-than-expected -7.2 million barrels this week, compared with a forecast of -2.5 million barrels.

From the technical point of view, yesterday’s rally in oil prices broke above the MA50 line, before slumping back to trade lower, now  stuck at a key resistance zone consisting of the 70.00 psychological level, the MA50 line and the top frame of the Channel. If it is able to breach this level, the next resistance level is at 74.00 and then the multi-year high of 76.36, while on the downside support is at 66.00 and the support of the MA200 Zone 62.00. Overall the price is not clear at the moment because the MACD is moving up near the 0 line, while the RSI continues to hover near the 50 level.

Things to keep an eye on for today include the US Non-Farm Employment Report, as well as other labor data. This is seen as important information for the Fed’s decision on the tapering path for QE.

Click here to access our Economic Calendar

Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand

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Wine of the week: a top-flight claret on the high street

2018 Château Deyrem Valentin, Cru Bourgeois Supérieur, Margaux, Bordeaux, France

£31.99, available at 218 Waitrose stores and at waitrosecellar.com

It’s funny how my drinking habits have remained relatively constant over the years, even though my palate veers all over the place on account of the tens of thousands of wines that I taste. I don’t think I have dipped into a single claret since writing my Bordeaux En Primeur Report back in May, but I have been quietly willing September to arrive. Each year this glorious month signals to me, at least, that the Bordeaux season is back on, and it will stay with me for the next eight months. While it is always amusing to pluck bottles from the cellar, it is very rare to find top-flight, reasonably priced bottles of claret on the high street, and it is rarer still when they happen to be drinking rather well.

I have long been a fan of Deyrem Valentin, a hidden jewel in the Margaux crown. Made from 50% merlot, 49% cabernet sauvignon and 1% petit verdot, and spending 15 months in 50% new French oak, this classic recipe could result in any manner of flavour, but at Deyrem you can always rely on subtlety, balance, silkiness and style.

My mother told me some 50 years ago that her favourite style of red wine was Margaux. The wines these days are, on the whole, a lot more extracted and powerful than they were a couple of generations ago, but this is the sort of wine she would have adored. Deyrem has never altered its style – honed, engaging, polished and in perfect equilibrium; this is fabulous for autumnal drinking.

Matthew Jukes is a winner of the International Wine & Spirit Competition’s Communicator of the Year (matthewjukes.com)

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Sony A7c: a pro-level camera at an affordable price

One of the defining features of a serious camera is the size of its sensor. Smartphones and cameras intended for casual snaps typically have a sensor smaller than one inch. “Prosumer” and enthusiast cameras tend to have larger ones, affording better image quality (especially in low light). Many professionals prefer to go with “full-frame” sensors, which are an attempt to replicate the 35mm format used in the days of film. Sadly, these tend to be exponentially more expensive, as well as bigger and heavier, which is why APS-C (or “crop” sensor) cameras are often considered the best compromise for hobbyists.

The good news is that recently several camera companies have been trying to produce full-frame cameras priced at a level more affordable for non-professionals. The A7c is Sony’s attempt to break into this market. Weighing (and looking) almost identical to the a6100, a6400 and a6000, it is compact enough to fit in a large jacket pocket and comes with all the features you’d expect from the latest Sony cameras, including a fast, accurate autofocus that is regarded as the best available, and which can automatically track subjects’ eyes. This extends to video recording and the camera has the capacity to record long clips. The body stabilisation feature allows you to take pictures at very slow speeds without camera shake. The colours seem both vivid and natural.

There are a few downsides. Firstly, in order to make it look more compact, the camera has been designed in a “rangefinder” style, with the viewfinder to the left of the lens, and the viewfinder is smaller than those for typical cameras. It also lacks a built-in flash. And although the A7c is relatively cheap compared with most full-frame cameras, it is still roughly double the price of crop-sensor alternatives.

Still, the A7c remains perhaps Sony’s most advanced camera and costs only around half to two-thirds the price of its other flagship models (such as the A9 and A9 Mark II). As someone who shoots a lot of theatre, where the level of light is limited, I normally have to use special lenses to ensure that the photographs don’t end up becoming too grainy. With the A7c, however, I am able to get large numbers of high-quality pictures using just the FE 28-60mm f/4-5.6 lens.

The Sony A7c costs £1,900 for the body only and £2,150 with the 28mm-60mm zoom lens. See sony.co.uk.

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Edinburgh beyond the Fringe

Two years ago there were mutterings that the Edinburgh Fringe and the other associated festivals had grown too large. Then last year’s Fringe was cancelled entirely. This year saw a drastically reduced number of shows due to the Scottish government’s continuing Covid-19-related restrictions. Still, despite the loss of spontaneity, the Fringe remained worth the trip and I got to see eight excellent shows in spite of the added hassle.

The much-reduced Fringe aside, Edinburgh remains a stunning city that has retained its distinctive character, with its blend of medieval, Georgian and modern architecture, all packed into an easily navigated package. The Museum of Scotland, the Scottish National Gallery and the Royal Yacht Britannia (moored in the Ocean Terminal) are all worth a visit; Edinburgh Castle is too, although currently you have to book well in advance. There is also a vibrant street-food scene – Pizza Posto on Nicolson Street serves the best pizza and bruschetta in town.

A magical photography tour

Budding photographers should also consider the Edinburgh Photography Tour. Former portrait and press photographer James Christie, who has snapped everyone from David Bowie to the Queen, combines a walking tour of the city with a masterclass on how to take professional-quality landscape photographs. Revealing hidden vantage points, he shows how taking your shot from just a slightly different angle can transform forgettable snaps into something magical (£100, jameschristiephotography.com).

By limiting the size of groups and giving tour leaders freedom to go their own way, Rabbie’s Tours has gained a reputation for going beyond the generic coach trip. Starting in Edinburgh, their one-day “west highlands, lochs and castles tour” takes you to ruined castles, picturesque lochs, charming villages and Inverary Castle, the home of the Duke of Argyll. During the trip, guide Graham Trotter talks you through the history and plays a carefully curated playlist of Scottish music (from £46, rabbies.com).

In nearby North Berwick, try the Scottish Seabird Centre for boat trips to the Isle of May. Famed for being the site of Scotland’s first lighthouse, the Isle of May, known as the “Jewel of the Forth”, is now a nature reserve teeming with wildlife, from guillemots, kittiwakes and shags to seals and puffins (although the puffins mostly leave in early August). The four-hour trip includes a detour to the Bass Rock (£50, seabird.org).

A perfect boutique hotel

For the last two nights of my stay I had the privilege of being a guest at the Dunstane Houses, consisting of two Victorian villas, Dunstane House and Hampton House, on opposite sides of the road. It is currently run by Shirley and Derek Mowat, who have transformed it from a beloved guest house into Edinburgh’s leading boutique hotel. It is ideally located for sports lovers and tourists as it is just a ten-minute walk to Scotland’s national stadium, Murrayfield, next to Edinburgh's Haymarket railway station, and just a short tram ride from Princes Street and the Royal Mile.

The hotel is designed around a traditional Scottish country-house theme and the owners’ Orkney roots are in evidence. Each of the 35 rooms has been personalised with a distinctive design and furnishings, giving them a unique character. All are comfortable and spacious and you can be assured of a sound and restful night’s sleep, and the staff are friendly, attentive and willing to go beyond the call of duty. The extensive menu will have something to sate every appetite, from light afternoon teas to a slap-up meal in the Ba’ Bar and restaurant. (Double rooms from £237.25 per night. See thedunstane.com or telephone 0131-337 6169.)

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