Borisjohnson
Britain Election Results, Lagarde Position and Trump TweetsElections in the UK, ECB decision and potential approach the finish line in the first phase of negotiations between the US and China. We will take these matters up one by one.
In Britain, parliamentary elections were held. The conservatives, led by current Prime Minister Boris Johnson, confidently won. This victory quite radically changes the political alignment in Britain, but for us, it is interesting primarily for Brexit. In this case, our basic version worked out perfectly: the “soft” Brexit option will be implemented based on the current version of the agreement between the EU and the UK. Naturally, the pound pulled up amid such results. Recall that in our reviews this week we actively recommended buying it. So congratulations to those of our readers who listen to our recommendations, with excellent results.
The ECB yesterday expectedly left monetary policy parameters unchanged. And the volume of the asset buyback program (quantitative easing) remained at the level of 20 billion euros.
The new head of the Central Bank Christine Lagarde said that the slowdown in the Eurozone economy has stopped. She could have been trusted, if not for yesterday’s data on industrial production in the Eurozone, which showed a decrease of 0.5%.
As for the other her statements, it is worth noting the intention to revise the ECB's monetary policy strategy, but some details will become clear not earlier than from the beginning of the next year.
But this did not contribute to the growth of the euro today. Brexit is a problem not only in the UK but also in the Eurozone. Accordingly, its resolution is positive for the euro too.
Yesterday we could observe the sales in yen pairs and gold, that is, in safe-haven assets. This sale was based on Trump's tweet that the United States came close to a deal with China.
Today we will buy safe-haven assets: first of all, sell EURJPY and USDJPY as a less risky option, but we will also look for points for buying gold.
Recall, on December 15, the United States may increase duties on goods from China. China will naturally response. Thus, Trump's tweet creates the illusion that there will be no further escalation. If the illusion is dispelled, it will provoke a sharp increase in demand for safe-haven assets.
The Beginning of The End for Brexit? Prime Minister Boris Johnson won a big victory at yesterday’s general elections with an estimated 360 seats versus the 326 needed for a majority. As result British Pound traded broadly higher, with six out of the seven GBP pairs rallying over 2% in just of a minutes. GBP/JPY was the biggest gainer of course, also because weaker yen, due to talk of a phase 1 trade deal between US and China on the horizon.
Intraday bias in GBP/JPY remains neutral and the consolidation from 143.67 could extend. Deeper retreat cannot be ruled out (specially in event if the US tariffs go into effect this weekend). Also the RSI indicator is in its overbought area on the daily chart, as you can see. But we expect the downside pressure should be contained well above 139.32 support to bring rise resumption.
On the upside, a clear break of 143.67 on daily basis will resume the rally from 126.67. Sustained break of the resistance trend line (now also at 143.67) will pave the way to 148.87 key level next. Above it is the psychological area 150.00.
Regarding EUR/GBP, the pair is trading stable around $0.83 now. Looking ahead, it is quite clear Johnson will be able to pass the withdrawal agreement in Parliament and if that happen we expect EUR/GBP to slide towards even 0.8150.
The UK General Election Put the GBP in FocusIt’s finally election day in the UK. Can Johnson win a majority and deliver on Brexit or is there more pain to come? The UK may finally would be able to put the epic Brexit saga behind it. GBP/USD is sitting now on 9-month high and H4 RSI is in overbought zone.
Boris Johnson is ready to take Britain out of the EU with the deal negotiated just weeks ago. Whether there are any jitters ahead of the first set of results remains to be seen, but some caution is likely to set in.
On a Tory victory market euphoria could see GBP push higher across the board. For the GBP/USD, beyond the March 2019 highs of 1.3380, it’s likely to see a rally towards $1.35 levels and possibly more before we start to see any retreat. Because such outcome was already priced in, later the pound could see a "sell the fact" pullback.
Of course, a hung parliament scenario is not excluded. The prospect of Brexit being done early next year will evaporate and the pound would price in further Brexit uncertainty taking it back to 1.2820 before further potential rebound from this support.
Labour Small Majority is the least market friendly outcome given market concerns over Labour’s nationalization and fiscal policies, in addition to further Brexit uncertainty. The market is not pricing in a Labour win. But if Corbin enter on Downing Street, the GBP/USD could drop significantly towards 1.26.
What is your projections and bets?
Time "X" is getting closer, Boris may be celebrating his victoryIn yesterday’s review, we already noted that this week may be decisive for several financial assets, and the global economy as a whole.
On December 15, the United States may introduce tariffs on goods from China and thus bring trade wars to a new level. It's entirely up to an agreement between the parties. Even though we have heard positive statements for more than a month, the situation looks more and more menacing day by day.
Although the probability of the successful completion of the first phase of trade negotiations between the United States and China is quite high, we will continue to look for points to buy safe-haven assets today. This recommendation will remain relevant until the actual conclusion of the contract.
Meanwhile, in the foreign exchange market, is getting ready for Johnson's victory in parliamentary elections in the UK. According to recent polls, the Conservative Party will be ahead of the Labor Party by at least 10%. Recall, for Brexit, this means the end of the story - Johnson will be able to present his version of the deal Britain will finally leave the EU with the deal. For the pound, this is a powerful fundamental positive background. In this regard, we continue to recommend the purchase of the pound. It may well grow in the foreseeable future by several hundred pips.
Since we are talking about the pound, we note that today will be published statistics on the UK. So you need to act with an eye on the data on GDP, trade balance and industrial production.
Speaking of our other trading ideas for today, they are unchanged. Oil purchases still seem like a great idea to us in light of the latest OPEC + decision. Dollar sales are also promising.
The UK General Election 2019. All you need to know.The UK General Election 2019. All you need to know.
Plus, a great betting opportunity guide as a bonus.
As we all know, The UK General Election is to take place on 15th of October, deciding the fate of the country not only for the next 5 years, but for the decades to come!
The need for the election was obvious, given the Brexit impasse in the parliament, that was unable to deliver Brexit for more than 3 years, sabotaging the will of the people. Having a Remainer prime minister without the real majority did not help the cause either.
Now, with new Brexiteer prime minister Boris Johnson at the helm, and the ERG-the European Research Group, the eurosceptic parliamentary fraction within the Conservative party, the country has got a chance to see some real action. Yet, we saw the parliament going to great lengths to sabotage the new government, ranging from using the powers of a scandalously biased speaker- John Bercow, to prevent voting from happening to using the newly created supreme court, who’s politically motivated decision undermined the government and the Brexit proceedings.
Getting to the election was a massive struggle in itself with the opposition blocking the motion to call for an election, which Implies the oppositions grim outlook on its electoral prospects.
Now, with less than 8 days to go, let's have a look at the election scene the way I see it.
So, the Tories are leading in the polls, entering this election as a ruling party, with some recent success in the Brexit talks, a charismatic energetic leader, and a clear Brexit position, which is now declared to be the hard Brexit, with a proper trade deal afterwards. The, who wins this election will decide not only the manner of leaving the EU but also the future relationship with the Block.
Brexit seems to be the key focus issue of the Tories in this election, and they are trying to steer all the debate into this channel. There is a grain of salt in there for Boris, however, as he promised to take the country out of the EU by 31st of October, and, as we can see, he did not. Not his fault though, but, a good aim for criticism for the competitors.
There are some spending promises from Tories too, for NHS In particular, which seems to have become the sacred cow of UK politics.
Boris Jonson himself is both an asset and a liability in the increasingly «presidential» in style UK elections. He is vocal and charismatic, bold and aggressive. Compared by many to Donald Trump in both the political style and in the way he looks. Some might remember him as a liberal mayor of London, for others, especially the young swing voters, his Brexit stance and his style might be a massive put off.
On the bright side, one of the highlights of the last debate was Boris’s clear position on Scottish independence. He said that the Union is more important than Brexit and than anything else, which is appealing to the part of the electorate that values the Union, which, let's be honest, is a majority, even in Scotland. Seats before current parliament dissolution: 298
Labor, in contrast, is entering the election mired In the antisemitism scandal, with Jeremy Corbyn as a leader and an unclear Brexit position. Corbyn, being a geriatric incoherent Marxist, who miraculously managed to become the Labor leader is a massive scarecrow for swing voters of all stripes.
The last election momentum surge, that deprived the Conservatives of their majority was largely due to the voter’s delusion of Labor being a Ramain party. That advantage is gone, with labor spending all 3 years of Brexit struggle sitting on a fence, calling it “constructive ambiguity” and now, becoming a second referendum party. Labor wants to renegotiate Boris Jonson's deal and then put the result to another public vote, with the Remain as a second option.
Unsurprisingly, Labor talks mainly about the “starved” public services, the river of cash for the NHS, the free broadband for everyone, in addition to their plans to nationalize Water, Rail, and Electricity.
More free stuff for everyone paid for by the money form the magic money tree, which is how Labor sees the government borrowing and taxation. Should labor get in power, having half their plan done is certain to put the country on the brink of insolvency. They call that ending the austerity, which turns out to be a maximum affordable level of spending when put under scrutiny. The fact that the public services used to get more funding in the pre-crisis Labor era simply means that the latter tend to spend beyond the means.
Another cornerstone of labor criticism of the Conservative opponents is the trade deal with the US which might be struck, should Brexit go as planned by the current government. Labor screams about the dreaded chlorinated chicken, lower labor protection and the sacred cow-the NHS being up for sale for the US health providers. For that, it is only fair to repeat Jonson’s joke, that the only chlorinated chicken here is Jeremy Corbyn himself. Seats before current parliament dissolution: 243
Lib Dems gamble on being a Remain party, with the policy to cancel Brexit seems to have backfired, with such pandering being perceived as unconstitutional and undemocratic by most of the people. Also, fake grotesque confidence exhibited by its newly elected leader, styling herself to the next Prime Minister which is almost impossible, has turned voters away.
The third mistake was remaining fiscally conservative, as it was expected for the Tories to go on a spending spree, so the Lib Dems wanted to appeal to the Tory voters, who are disappointed with the so-called current conservative's swing to the right, but who can’t vote labor. Having a female leader- a fresh face that is not mired in the “dirt” of the coalition years might help, yet, I don’t see the Lib Dems as a formidable contender. Seats before current parliament dissolution: 20
SNP- the Scottish independence party is interesting to watch with the independence talk being reinvigorated by Brexit, with not only the majority of Scotts voting Remain in the Brexit referendum, but also, previously, many voted to stay in the UK during the Scottish independence referendum, because of the UK’s membership in the EU. Now, with the UK set to leave the EU, SNP is making the case for another independence referendum, arguing that the post-Brexit UK would be such a different country, that another referendum is needed. Seats before current parliament dissolution: 35
The other parties are most likely to keep their insignificant number of seats and are largely irrelevant for this analysis. Independent MP’s: 24, DUP:10, Others:22. The total number of seats in the house of commons:650.
There is another interesting element in this election: the Brexit Party. A newly formed party starring in the latest EU parliamentary elections, which theoretically were not supposed to take place in the UK due to Brexit, humiliating Britain with its inability to get the job done.
The party is Nigel Farage’s child, who is arguably the most notorious and well-spoken Brexiteer, who advocated for the UK leaving the EU for the last 20 years.
The party was meant to be a boogieman for the Tories, pushing the latter further south on the scale of the Brexit hardness, threatening to steal the leave voters from the tories around the country.
The Brexit party's current position exposes the inadequacies of the UK’s current electoral system. The first-past-the-post (FPTP) system, where single MPs are picked per constituency on a non-proportional basis, means that smaller parties have virtually no chance of getting any representation in the parliament, ensuring the two main party’s lead position.
UKIP- the UK independence party, a former Nigel Farage’s project is a perfect example of the inflexibility of the FPTP system, with the UKIP polling in 7-12 percent at times, yet failing to get a single MP in the commons for years.
Voters might like your agenda, yet people vote for the party that has got chances of being in power at the end of the day. In other words, it is theoretically possible for the party to get 30% of the popular vote, but with it being distributed evenly among the constituencies, the party gets ZERO representatives in the parliament.
The recent study shows that nearly 14 million voters are living in constituencies that have been held by the same political party since at least the second world war, with some not having changed hands for more than a hundred years.
The Brexit party’s power, while having no chance of getting a single MP, is in that it could steal some voters from the Conservatives in each constituency, delivering victory to the Labor.
That is how it was supposed to work. This position might have shifted the Conservatives position, so the plan worked. Now, however, with the Tories being the only ones, who can deliver any Brexit at all, Nigel Farage said they are not targeting Conservative seats.
The same complication haunts the Lib Dems, with the Conservatives saying: vote Lib Dem-get Corbyn in power. And that is a reasonable claim.
It is clear, that this election is going to be about who you hate the least, not the who you like the most.
With no one having made a single major gaff yet, the campaigns have been quite dry and boring, the debates were toothless and uneventful. Taking this into account, with just a week left to go, the polls and the common sense suggest a high chance of the Conservative majority, with the bookmakers supporting this view with 2/5 odds on this scenario vs 6/1 on the Labor Minority being a second likeliest one.
Labor Minority, which Implies that Labor takes more seats than the Conservatives, yet less than needed for the majority, is wildly unlikely, due to the fact that Lib Dems are mostly targeting Labor seats. SNP might gain in Scotland, taking seats from both labor and Conservatives. So Torie seats are largely the only ones, that Labor can be targeting , which will prove to be a hard thing to do, given the current poor state of the labor party.
Tories minority government seems to be the second likeliest option to me with the odds around 10/1 making it an excellent betting opportunity. Here is why. If Tories don’t get the majority, labor might indeed try to form a coalition government by promising SNP a second independence referendum and offering Lib Dems a seat at the table and a second Brexit referendum with even softer Brexit option on the table. Labor will need both SNP and Lib Dems to form a coalition, which makes it an unlikely option, given the limited time given to form the government and the difficulty and instability of the Trilateral relationships. The prospects of the coalition are further undermined by the Lib Dem's bad memories from the coalition with Tories. Will they risk another one? Who knows. The unlikelihood of the coalition government is reflected in the 22/1 odds, making it a formidable betting option too, because, while being less likely than the Conservative Majority/Minority government it is still possible given how volatile politics has become.
Common sense suggests that the Tories majority is the best scenario for the UK now, as this option provides certainty with regards to Brexit, makes the US trade deal possible, and keeps the Union intact by denying the SNP their second referendum, which is an insane endeavor, to begin with. Not least because they had one already. And such votes are supposed to be a once in a generation thing at best. You can't just throw in an independence vote now and then for a laugh. Also, we can trust the Conservatives to be fiscally responsible, which will help the country prepare for both the possible global crisis and the headwinds of the first post-Brexit years.
On a side note, Brexit and all the other issues that the UK faced in the last 5 years exposed an outdated political system unfit for the 21st century. The need for the electoral reform, giving more power to smaller parties while also allowing for the new ideas to come onto the political scene, forcing major parties to adopt, is clear as day.
There is a need for a written constitution too, now that the UK has got a supreme court, which was able to overturn the decisions of the government recently while being unelected and unlimited in the scope and direction of its decisions by a written constitution. Finally, a radical decentralization is crucial to keep the Union, or one, and also to allow for the county to be run more efficiently, whereas now almost all the power rests in London.
The end.
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US records, Trump irritates Sino & Johnson is ready to celebrateMost Americans, as well as financial markets, received the day off from work on Thursday, therefore, we can focus on other financial markets.
In today's review, we will focus on the oil market. Recall that next week the OPEC meeting should be held, which could potentially change the existing balance of forces in the oil market. But we will talk about this meeting later.
Now let's focus on the current state of affairs. Oil growth last week was highly dependent on optimistic news about the progress in negotiations between the US and China. Accordingly, traders worked out a possible increase in demand in the oil market.
But, as we already noted in the previous reviews, the markets are already tired of promises and waiting for results. Accordingly, oil growth stopped.
The participants in the oil market can be understood, especially considering that Trump has nevertheless signed a law to support protesters in Hong Kong. Potentially, this could cause a new round of escalation in relations between the USA and China and another breakdown of the negotiation process between the countries.
At the same time, statistics from the US come out bearish. First of all, it is about the USA reaching a new record in oil production: 12.9 million barrels per day. The result was an increase in US oil reserves, which in aggregate puts pressure on oil quotes and not only does not allow the asset to grow but also pulls it down.
Our position in oil is as follows: we look for points for selling the asset on the intraday basis and sell oil in the medium term (current prices are quite favourable for this).
But lets back to other news and markets. According to a YouGov poll, conservatives will win and get the vast majority in the December 12 elections in the UK. This means that Johnson will have every opportunity to ratify his Brexit deal. Thus, the probability of exit without a deal has become even more insignificant. For the pound, this is undoubtedly good news. Recall that its growth potential is far from exhausted. We are talking about 500-1000 points of the possible growth of GBPUSD. So we continue to recommend buying a pair.
China makes concessions, Johnson's manifesto & Societe forecastsOn Monday markets were waiting for the successful completion of the first phase of trade negotiations between the US and China. This time, a positive signal was China's willingness to increase the punishment for violating intellectual property rights. China's regular violations of these rights that particularly irritated the United States and largely hindered negotiation progress.
Information about the victory of the Democrats in Hong Kong also helped to relieve tension in the financial markets, as there is hope that this conflict can be resolved peacefully.
Against the backdrop of such news, the decline in safe-haven assets seemed quite understandable on Monday. However, while we do not see any reason for global repositioning, we will use this decline in gold and the Japanese yen as an opportunity to buy safe-haven assets cheaper. Moreover, there is a “Trump factor”, which literally can turn the situation upside down. For example, sign the bill on human rights and democracy in Hong Kong or blame China for intransigence, etc.
In addition, the global crisis is still potential. For example, analysts at Societe Generale expect a recession in the spring of next year. According to experts of the bank, the next recession in the United States will be triggered by a sharp reduction in company profits, which, in turn, will be caused by the rapid acceleration of labour costs.
Yesterday was pretty successful for the British pound. The fact is that on Sunday, Boris Johnson has launched his party’s manifesto, in which he promised before December 25 to submit to the parliament an agreement on Brexit, agreed in October with the EU. According to surveys, the Conservative Party is now supported by 42% of voters, and the Labor Party - 29%. That is, with such a scenario, there is no risk of Britain leaving the EU without a deal, but the growth potential of the pound is far huge. So we continue to give preference to purchases of the pound, but until the announcement of the election results, we do not expect strong directional movements in the pound and recommend adhering to oscillatory trading, that is, buy the pound from hourly oversold zones and sell from hourly overbought zones.
As for our other recommendations, today we will sell a pair of USDJPY, buy EURUSD, and also sell oil.
IS GOLD READY FOR ANOTHER MOVE UP? (1600 ??)HELLO EVERYONE,
Coming to Analysis of GOLD, here are a few points to be considered :
--Price has rejected the demand zone formed at 23.6,27 level(indicates a strong uptrend after it broke out of the weekly sideways structure .
--Currently I am looking for a nice move to the upside as the price may follow to our next supply zone at 1600-1610, expecting a ABC move on Daily
--The Targets have been defined over Critical Demand/Supply zone to ensure accuracy over the targets.
COMMENTS ARE WELCOME >.
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Uncertainty on Brexit can push Cable lower?As the UK is strugling to find a deal for the Brexit, the Pound seems to have found a consolidation zone and maybe push lower waiting to have some news.
Here I bring two setups about the Cable, probably one of the most interesting pair these weeks. After a small correction move to the downside the Cable have break the trendline and in the middle of last week we saw a good push to the upside thanks to the USD economy strugling. Now it seems to have found a good resistent, perfectly allining with the 78.6% Fibo retracement and in smaller time frame have formed a double top.
What I'm looking at is a retest early next week in the zone and then taking a short after some candlesticks confirmations all the way back down to the 1.28000 area of support. If we can't reach that level we can think about catching the short after the break and retest on the support were we are now. Let's see if Farage, Boris and company can push this pair lower!
GBPUSD testing trend lineSo Parliament rejected tonight BJ's attempts for a snap election. This should be good for GBP as we have less uncertainty without snap election. Though BJ is bound to try having it again.
Now testing the downtrend line again, long on the break of the line and 200SMA.
Good Luck!
Brexit postponed, last quiet day of the weekThe Brexit date is set to be delayed until 31 January Again. Johnson, as promised, asked parliamentarians to call early elections in December.
He has failed to win on Brexit. Johnson said that he would make another attempt today and said that without early elections, it would not be possible to ratify the agreement with the EU.
Today will be the last relatively calm day in the foreign exchange market, because on Wednesday the Fed and the Bank of Canada will announce their decisions, on Thursday we expect news from and the Bank of Japan, well, on Friday we are waiting for data on the US labour market to come out. So it will be an extremely interesting and volatile week. But we will talk about these events as they approach.
And today we suggest focusing on trading using the stochastic oscillator. That is, we trade without obvious preferences according to the signals from hourly oscillators - we buy in the oversold zone and sell in the overbought zone. But at the same time, we do not try to impose our will on the market and fix our positions with relatively small stops.
List of our current trading preferences as follows: selling the dollar, buying gold and the Japanese yen, selling the Russian ruble and buying oil on the intraday basis. -Some of the positions may change their direction, so new prospective options could be added.
For example, purchases of the Canadian or Australian dollars against the US dollar. The only thing that keeps us from actively recommending the purchase of commodity currencies is their approach to important levels. The Canadian will have a chance to hit the key support on Wednesday when the results of the meetings of the Bank of Canada and the Fed will be announced. The Australian dollar may take advantage of the possible sale of the US dollar on Wednesday after the Fed’s decision and also gain a foothold above 0.6880.
Get ready for Fed decision, Brexit & bullish oil marketBrexit was accustomed to being the main news generator last week, at least for the pound pairs.
Parliament refused to vote for the deal until it made changes to British law, which meant the need to request a postponement. In our opinion, this is just a way to publicly humiliate Johnson, who has repeatedly said that October 31 will be the end date. As a result, Johnson sent a letter to the EU asking for a postponement, but “forgot” to sign it.
In the EU, instead of a postponement, decided to wait until the British agreed on something. It is all about the special election. On Monday, this issue will be put to a vote in Parliament.
In general, the week will be hot for the pound from its very beginning. Well, the date of October 31 is Thursday of the current week. So get ready for the sharp spike in pound volatility. Generally, we remain bulls on the pound - the issue of leaving without a deal is practically removed from the agenda, so this is a sign for buying the pound. But its decrease by several hundred points against the background of negative news from Parliament / Government of Great Britain or the EU is quite possible. So do not forget to put stops and monitor the news background.
The current week for all other participants in financial markets (except the British) will be interesting first of all by announcing the Fed's decision on the interest rate on Wednesday. The current consensus - lowering the interest rate, and then will put the process of changing rates to a pause at least until the end of the year. We’ll talk more about this on Wednesday before the event.
Unexpected for the markets Central Bank of Russia decreased the interest rate by 0.5%. Given that the ruble came close to our settlement point No. 1 for the sale of the ruble, we recommend opening long positions in the USDRUB from current prices in the region of 63.60 with a minimum target in the region of 65.20. The second round of purchasing starts at about 62.60.
And a few words about the oil market. Formally, our recommendation to buy in the region of 51.20 with goals 56 last week worked out completely. Knowing how events are developing, there is a chance to raise the growth target - oil may well reach 60 (WTI brand).
According to Baker Hughes, the number of oil rigs in the United States fell by 17 to 696 units. Thus, their number has fallen to its lowest level over the last 2.5 years. Recall, last week, US oil inventories decreased by 1.7 million barrels. So this week we are looking for points for oil purchases. The goal until the end of the week is 60. But at the same time, do not forget to set up small stops.
ECB waits, economy stagnates, Johnson keeps pound from growingAt yesterday’s meeting, the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged. So Draghi can leave with a sense of accomplishment, but his successor Christine Lagarde will have to solve a challenging task - how to stimulate the economy if rates are lower than zero.
Yesterday's macroeconomic statistics has been psyching negative thoughts out. The composite PMI index in Germany is below 50 and worse than forecasts, the similar index in the Eurozone as a whole turned out to be above 50, but it came out worse than forecasts, and its recessive values remained only - 0.2. Orders for durable goods in the United States fell by 1.1% m / m in September (forecast: -0.7% m / m), while composite PMI in the United States, although it reached 51.20, is still worse than analysts' forecasts.
In general, the economy continues to generate signals in favour of stagnation. Recall recent data on manufacturing activity in Japan, which reached its lowest level over the past 3 years, or China's GDP, which has reached thirty-year lows.
Returning to the ECB and its negative rates, I would like to note that regulators are one step away from being stuck when traditional instruments of influence on the economy go off, but there is nothing to replace with. In general, the threat of a global economic catastrophe from a hypothetical opportunity may well become a reality.
Well, we recall that during periods of crisis, the investment strategy needs to be radically adjusted: replace investments in stocks with investments in bonds, increase cash in the portfolio and spend part of facilities on the purchase of safe-haven assets.
In this light, we continue to recommend buying gold and the Japanese yen.
Speaking of threats. Boris Johnson continues to stop the pound from growing. His intention to hold early elections in December is becoming real. On Monday, this issue will be put to a vote in Parliament. And if the EU by that time manages to agree on a postpone on Brexit, then the opposition is ready to vote “in favour”, which means that early parliamentary elections are waiting for Britain in December.
Draghi - Last word, Johnson's threats, EU and USA statisticsThe main event will be the announcement of the ECB decision on the monetary policy parameters in the Eurozone. Given the general tendency toward easing monetary policy in the world and the recent actions of the Central Bank of Europe, euro can be expected a pretty unpleasant surprise, In theory. But in practice, most likely everything will be ok.
Mario Draghi is ending his eight-year term at the European Central Bank. Accordingly, there is simply no reason for him to present any surprises and slam the door after leaving. However, follow the ECB's comments on the quantitative easing program and the size of bond purchases by the Central Bank is needed.
Given the general state of the global economy in general and the Eurozone in particular, the ECB does not have to rely on positive signals for the euro today. But they are unlikely to sell the euro. In this regard, today we recommend working with the euro with hourly oscillators, but with a mandatory eye to the decision and comments of the ECB.
Also, today it is worth paying attention to data on business activity in Germany and the Eurozone. They may well create the ground for a subsequent reaction to the results of the ECB meeting.
As for other countries and currencies, quite a lot of macroeconomic statistics will be published in the United States, including data on orders for durable goods, business activity indexes, as well as statistics on sales of new homes. We are still negative about the dollar, so we recommend using weak data as a reason for its sales in the foreign exchange market.
The Brexit situation is again plunging into a chaos of uncertainty, but uncertainty without a global threat. This refers to an exit without a deal.
On the one hand, the House of Commons of the British Parliament supported the new Brexit bill, based on an agreement reached by the government with EU representatives last week. On the other hand, Johnson does not abandon attempts to complete Brexit by October 31 and proposed that Parliament finally approve the agreement on Thursday, otherwise he promised to withdraw the agreement and call early elections.
Despite Johnson’s threats, markets generally believe in a happy ending but are not completely sure what final form Brexit will take. In this regard, our recommendations to buy the pound on the rebound remain relevant today.
The oil market experienced some recovery yesterday after the publication of data on oil reserves in the United States. Oil stocks unexpectedly declined (by approximately 1.7 million barrels, while markets were preparing to continue their growth by 3 million barrels). Our position in oil is still unchanged: while the asset is above 51.20 (WTI brand), we give preference to purchases on the intraday basis.
The break goes on, commodity currencies and the pound purchases The break is going on. Bursts of volatility are observed in pound pairs (just after the last two volatile weeks, this activity seems to be increased only against the background of other currencies standing still). This contributes to both the accumulated fatigue after full of events weeks and the lack of important news.
Justin Trudeau has won a second term as Canada’s prime minister after the country’s federal election. The news as a whole is positive for Canada in general and the Canadian dollar in particular. However, no one rushed to buy it. Nevertheless, we consider Canadian dollar purchases to be a rather prospective trading idea, despite the strong oversold of USDCAD and rather weak data on retail sales in Canada published yesterday (-0.1% with the forecast a + 0.4% rise). So today we will look for points for sales of USDCAD.
Since we are talking about commodity currencies, we want to draw the attention of our readers to AUDUSD. If today it can gain a foothold above 0.6880-0.6890, this will be an excellent occasion to open long positions with a minimum target in the region of 0.7020.
Note that in the light of progress in the negotiations between the US and China, trading currencies, which include the Australian and Canadian dollars, actively work out latest losses and, on the whole, seem quite prospective.
Another good trading idea. Descents of 150-200 +/- points should be used to buy the GBPUSD. Remember, set stops because, at any moment, Brexit news may provoke bursts of volatility.
Speaking of Brexit and the reason for pound’s fall. The main question that plagued the markets can Boris Johnson 'get Brexit done' by October 31? Recall that we predicted that he could not, but in the end, everything would be okay. On the one hand, the Parliament made it clear that it was ready to support the agreement. On the other hand, there is no way to be in time before October 31.
In addition to the statistics on retail sales in Canada, yesterday was remembered for its still weak data on the US real estate market (Sales of existing homes in September fell by 2.2%, while analysts forecast a 0.7% decrease). In this light, we once again recall our recommendation to focus on looking for points for the US dollar purchase. In addition to commodity currencies and the pound, safe-haven assets (gold and the Japanese yen) are well suited for this.
Markets took a break, pound tested 1.30"Markets took a break" the lack of high-profile news and frankly difficult weeks contributed to that yesterday.
GBP has tested 1.30 against the dollar. As we expected unsuccessfully since a successful test requires positive news from Britain. Johnson’s attempt to accelerate the negotiation process did not bring home the bacon. Parliament refused to re-vote on the approval of the agreement. Motivation: the decision was already made on Saturday and it makes no sense to discuss the same thing again.
However, Johnson does not give up trying to take the UK out of the EU on 31 October. We are rather sceptical about this and are waiting for a delay for another 2-3 months. Nevertheless, the general feeling of further leaving hangs in the air, so buying pounds in the daily lows area still seems to us to be a good trading idea. In the end, the growth potential has not yet been exhausted.
Another promising idea, in our opinion, is the sale of the dollar. But recently, we see more and more reasons to start a downward dollar rally: rates in the US are falling, economic indicators are deteriorating, US exporters continue to suffer due to a strong dollar (in the current reporting season, at least 16 leading companies have complained about problems with profit due to for a strong dollar), in addition and do not forget about the structural problems of the US economy (public debt, chronic trade deficit and trillion budget deficit). So we will continue to look for points for selling the dollar in the foreign exchange market.
Canadian retail sales figures are what we are waiting to come out. Especially because the Canadian dollar has recently strengthened in the foreign exchange market. On the one hand, the Canadian dollar may still grow. On the other hand, weak data on the background of a rather strong overbought Canadian dollar may well give a signal for fixing profits and starting correction in pairs with the Canadian dollar. We are closely watching the news.
UK Verdict, our recommendations and plansA new version of the Brexit deal has been agreed between the EU and the UK. The pound added about 500 points by the end of the week, bringing the account of its achievements to almost 1000 points. Recall that the UK and the EU, as we predicted, were able to agree on the terms of the deal at the last moment. As a result, at the EU summit on Thursday, this deal was approved by Europe.
Another problem appeared - Johnson does not have a majority in Parliament. Accordingly, he had pretty high chances to repeat the fate of his predecessor, Theresa May, who also agreed on the deal, but could not pass it through Parliament. On Saturday, a vote took place, following which the British Parliament ordered Johnson to ask for a 3-month postpone so that parliamentarians could bring its legislation into line with the new realities.
Johnson, who says more than once that there will be no postpone. Thus, he was put in a rather uncomfortable position. In general, there is a feeling that such a vote is rather an attempt to publicly humiliate Johnson, rather than a really necessary thing to do.
Nevertheless, Johnson sent an unsigned letter to the European Union on Saturday requesting a Brexit delay. At the same time, he sent a couple of letters to the EU (which he did not forget to sign), in one of them he says that he is against the postponement.
This week we will continue to look for points for its purchases because the Brexit issue has not been solved yet. Therefore there is still potential for the pound to grow.
It is worth noting the weak statistics for the United States and China, which only confirmed what has been clear for a long time: trade war cause real harm to everyone. No breakthroughs were observed regarding the end of them. In this regard, we recommended focusing on finding entry points for the purchase of safe-haven assets.
Given the state of financial markets at the beginning of the week, we see no reason to revise our recommendations and this week we will continue to look for points for buying gold and the Japanese yen.
As for the euro. Technically you need to buy EURUSD, we recommend doing it with an eye on Thursday. The ECB will announce its decision on the parameters of monetary policy in the Eurozone on Thursday. Most likely, there will be no changes, but given the general weakness of the Eurozone economy, we will not be surprised at the “dovish” comments from the Central Bank or even the expansion of measures to soften the monetary policy, which may well provoke euro sales.
The oil market was relatively calm last week. And although the Middle East continues to resemble a powder keg (Turkish military operation in Syria, an attack on an Iranian tanker, etc.), so far the markets are trying to ignore it. Last week, reserves increased by almost 10 million barrels - the maximum value since April 2019. Saudi Aramco has postponed the launch of its long-awaited initial public offering on Sunday. And although there is no direct connection between this event and the state of the oil market, in general, this is a rather bearish signal. As for our position, it is generally unchanged, while oil (WTI brand) is higher than 51.20, we tend to buy oil.
The supreme test of pound, China's GDP & US retail salesYesterday Brexit turned a corner. The Prime Minister got the European Union to renegotiate the Withdrawal Agreement that the EU said to would never renegotiate. The British pound, as we expected, hit a fresh five-month high above 1.30. But after that, many buyers decided to take profits, resulting in a rebound of the pound more than 150 points down. The reason for taking profit was both about 1000 points per week, which, for example, could be earned in the GBPUSD, and fears that Brexit deal might fail again.
Parliament is expected to sit on Saturday in what could be one of the most important Commons’ sessions of the entire Brexit process. Recall ones the agreement between the EU and Great Britain was already agreed, but the country's parliament voted “against”, as a result, Teresa May resigned and everything had to start all over again. If the story repeats, then the further development of events can be quite unpredictable. That is why many decided to take profits, and it is difficult to blame them. The fact is that the current version of the treaty doesn’t quite satisfy the Irish Democratic Party. And without their support, Johnson is unlikely to gain enough votes.
As for our position, so far it is unchanged. We consider such bounces of 150 points as an excellent opportunity for purchasing. If the Parliament votes “for”, the pound will simply be doomed to further growth. It will be 200-300 points or 1000 is difficult to say, but pound purchases will live up to.
If Boris fails that will certainly trigger massive sales in pound pairs. This option must be borne in mind and do not forget to put stops. You can safely sell the pound if he loses.
The US, meanwhile, continues to show weak macroeconomic statistics. Yesterday, data on industrial production not only came out worse than forecasts below 0. The statistics on the real estate market did not please either. In general, we see an increasing number of reasons for the sale of the dollar. And today we continue to look for points to open short positions on the dollar in the foreign exchange market.
Of the other statistical news, it is worth noting today's data on China's GDP. The indicator reached 6% (with a forecast 6.1%). Industrial production growth rates (went above forecasts) and retail sales (within the framework of forecasts, but in a good plus).
In this light, our recommendation to buy safe-haven assets continues to be relevant. So today we continue to look for points for purchases of gold, as well as the Japanese yen.
Rally is coming?
Fibonacci levels are favorable to consider a mini rally.
Hold the position for 2 or 3 days and we'll see.
EUR/GBP Call long entry, AB=CD with ab=cd
Just for feet.
4 hours chart
AB = 1,811 fibonacci
ab = 1,803 fibonacci.
The risk is acceptable, so come on bb
