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On business activity, oil prices and the W-formBusiness activity data from Markit were released yesterday, prompting markets to speculate about a W-shaped economic recovery. In Germany and Eurozone, the manufacturing sector continues to recover, but the services sector is experiencing problems (indices are below 50, that is, activity is declining). In the UK, the situation is generally better, but given the latest pandemic trends, one should not be too hopeful. In the US, both components are above 50, so buying the dollar against the euro and the pound remains the basic trading idea for the FOREX today. Given such data and current statistics on the pandemic in Europe and the world as a whole, the economic recovery may well take a W-shape. That is, after a rather sharp recovery in the summer, the economy will sink to the bottom again. So short positions in the overpriced stock markets are our trading ideas for today and the nearest future. As a result, the ECB, campaigning for additional stimulus. In particular, Board Member Fabio Panetta said on Tuesday that it would be better to do too much than too little. There are more and more voices from the Fed for additional support for the economy, but not by the Central Bank, but by the Government. As for commodity markets, the dollar's rise is a reason for gold and oil sales. Moreover, news from Libya (a sharp increase in oil exports from the country is expected) is definitely set up for oil sales. The data for oil reserves in the United States (according to EIA, again decreased by 1.6 million barrels) are unlikely to be able to change the situation on the market.
Short
by Trade24Fx
1
Mnuchin and Powell, remote work and the second waveThe situation with the pandemic in the world is not improving: in a number of countries it is significantly worsening. Last week we wrote that Israel has already introduced a second lockdown and it is far from a fact that it will be an exception. The second wave is increasingly covering Europe, especially the UK. As a result, the UK government asks citizens to work from home, and if the situation does not begin to improve in the near future, a new lockdown may also be introduced in the country. According to one of the country's top scientific advisers, the number of new cases in the UK by mid-October may exceed 50,000 (so far, the number is 4,000). So, sells of EURUSD and GBPUSD look like a promising idea today in the FOREX. In general, remote work is becoming a universal long-term phenomenon: many corporations, following the results of the first lockdowns, have come to the conclusion that this approach is cost-effective. Which, again, can radically change the current economic landscape in the world. In this light, for example, the return of demand in the oil market to pre-pandemic values becomes less and less likely, at least in the foreseeable future. According to Eurasia Group in 2020 global oil demand will decline by more than 10% from last year to about 90 million barrels per day (this will be the largest demand shock in the industry's history). So our recommendation to sell oil remains valid. The pandemic continues to generate heightened economic uncertainty. In this regard, US Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell were testified in Congress yesterday. Both have expressed cautious optimism that the US economy is recovering from the recession caused by the pandemic. But the situation remains uncertain and the economy needs additional help from the government. In general, their speeches did not bring anything radical new. "Battery Day" for Tesla was not so successful (a decrease in the company's shares by 5% hints at this). On the one hand, the new batteries will help Tesla reduce the size of its cars by about 10% and increase their range by 56% (the total range will be about 800 km) and, in the future, bring the price down to $ 25,000. On the other hand, if all this becomes a reality, then not earlier than 2022.
Short
by Trade24Fx
Laundering scandal, battery day, UK and lockdownThe week for the US stock market started on a minor note. Not only because Friday close for Nasdaq below 11,000, which looked like a verdict to buyers (at least from the standpoint of the current market sentiments), but also because the International Consortium of Investigative Journalists (ICIJ) published the results of an investigation where JPMorgan Chase & Co., Deutsche Bank AG and several global banks have been involved in transactions flagged as possible money laundering. The total amount of these transactions exceeded $ 2 trillion over a nearly 20-year period. As a result, the shares of the banks mentioned in the report fell (shares of Deutsche Bank AG fell more than 7.5%, and shares of HSBC Holdings Plc fell to a 25-year low). This fall created the necessary background for the general decline in the US stock market. However, today Tesla may give reason for some optimism. Company on Tuesday is holding an annual meeting of shareholders timed to coincide with "battery day". Tesla as expected will announce details about its new type of battery cells. We will not be surprised by the growth of Tesla shares by the end of the day, but we believe that they are extremely overpriced. As for other trading ideas, in the foreign exchange market it is primarily the sale of the British pound. The country is on the verge of a second lockdown, will increase the downward pressure on the pound. Over the past 2-3 weeks, the number of new infections in the UK has increased several times and the process is clearly becoming uncontrollable. The dollar rose quite well yesterday by the end of the day, having tested the upper boundary of the Dollar Index mid-term range, which in itself is a reason for selling it. So, buy EURUSD today or sell USDJPY seems like a pretty good trading opportunities, as well as buy gold.
FOREXCOM:XAUUSDLong
by Trade24Fx
2
Week in a Glance: Fed and Bank of England, mega-deals and oilThe past week turned out to be very eventful with all sorts of fundamental events. Three leading central banks announced their decisions on the parameters of monetary policy in the USA, Japan and the UK. The OECD has updated its economic forecasts and Japan has a new Prime Minister. Oil showed its best week since June, and a number of mega-deals took place in the US stock market. We will talk about this and much more in today's review. The Fed, Bank of Japan and Bank of England left the parameters of monetary policy unchanged. And if the US Central Bank made it clear that zero rates are for a long time (at least until 2023), then the Bank of England decided to start discussing the issue of negative rates. For the pound, the news is more than negative, so this week we will continue to look for an opportunity to sell it intraday and mid-term, at least while there is no progress in the negotiations between the EU and the UK. Also we will buy the Japanese yen this week, as the new Prime Minister of Japan, Yoshihide Suga, was approved last week, who, as Shinzo Abe's right hand, should continue the current economic policy of Japan. The US stock market was also saturated. The reason is not only " the witching day" on Friday, when it was the day of expiration of futures and options contracts for major US stock indices, but also a large number of megadeals. For example, SnowFlake, which held the largest IPO of 2020 and the largest in the history of a software company. NVIDIA wants to buy British chip maker Arm from Japan's SoftBank Group Corp for $ 40 billion, and Gilead Sciences has offered to pay $ 21 billion for the biotech company Immunomedics. It is symptomatic that against the backdrop of all this (mega deals, ultra-soft Fed), as well as improved forecasts for economic growth in 2020 from the OECD, the Nasdaq index closed the week below 11,000 (a very negative signal for bulls). Since we have been systematically recommending sells in the US stock market, this signal for us is positive, it proves our rightness. Oil finished its best week since June. But we believe that this is just a reason for more aggressive sells, because now prices are just much better for this and nothing more. Last week OPEC lowered its forecasts for the oil demand in 2020. Same have done the International Energy Agency and British BP. Trafigura Group (the second largest oil trader in the world) warns that the oil market is again close to a surplus. As for the OPEC + meeting, we have an obvious failure in compliance (its level for the case of the UAE fell to 10%). Only the threats of Saudi Arabia to punish everyone can be treated as some positive for oil.
TVC:USOILShort
by Trade24Fx
2
Bank of England hits pound, jobless claims and OPEC meetingCentral Banks of Japan and England announced the results of their meetings yesterday. Following the Fed, they decided to leave the parameters of monetary policies unchanged. But at the same time, the Bank of England dealt a rather painful blow to the British pound, noting that it will intensify the discussion of negative interest rates due to the increased uncertainty in the economy. However, everything is unclear not only in England. Although the US economy is recovering, it has been doing it quite slowly lately. Yesterday's data on jobless claims is a vivid proof of this. On the one hand, the number of both primary and secondary applications has decreased. But, on the other hand, they are still several times higher than the pre-pandemic values. And if they continue to improve at such a pace, then it will take at least another six months to reach the pre-pandemic levels. Republicans and Democrats have not stopped trying to negotiate a new stimulus package for the United States. Perhaps there has been some breakthrough. At the very least, Trump's words that he is open to additional costs and the final package of $ 1.5 trillion are definitely a step towards a compromise with the Democrats. OPEC + members met online yesterday. Despite the downward revision of forecasts for oil demand, OPEC+ did not begin to expand the volumes of the voluntary production cuts. They can be understood because a number of countries do not even comply with the current obligations. According to the IEA, the UAE alone exceeded its oil production quotas in August by an average of 520,000 bpd. OPEC+ once again shook a finger at the violators. In total, nothing that can be interpreted as a reason for oil growth at the end of yesterday did not happen, which means that current prices are an excellent opportunity for sales.
Short
by Trade24Fx
1
New prime minister in Japan, ultra-low Fed and OECDYesterday was quite eventful for all sorts of events. For example, Japan has decided on a new prime minister to replace Shinzo Abe. Epoch is leaving for the Japanese economy (quite good one compared to the 90s) and the markets were very worried about the successor. It turned out to be Abe's right hand Yoshihide Suga. So, financial market participants breathed a sigh of relief, which triggered an increase in demand for the Japanese yen. Another reason for the positive (if, of course, this word is appropriate to describe this situation) was given by the OECD. The organization has updated its own forecasts for economic growth in 2020. Quite unexpectedly, the forecasts were revised upward on average. China is now generally expected to increase its GDP by the end of the year. Estimates for the US, EU and UK, as well as for the world in general, have been revised upward. Still, for a number of countries (especially emerging ones) forecasts were worsened. For example, for India, the forecast was deteriorated by more than two times. In this light, recall that sells in the Indian stock market and the Indian rupee, given the current prices of these assets, look very promising trading ideas, especially if you will take a look at the current pandemic situation in India. The US retail sales data disappointed yesterday, its growth turned out to be much lower than expected (0.6% against the forecast of 1%), which once again reminded the markets that the economic recovery in August in the world has rapidly slowed down. The main event of yesterday for the financial markets as a whole was the announcement of the Federal Open Market Committee meeting results. As expected, the monetary policy parameters were left unchanged. The central bank met the markets' expectations that ultra-low rates will last for a long time (13 out of 17 committee members expect rates to be unchanged until 2023). It would seem that the US stock market received a powerful reason for growth, and the dollar - for a decline. But in fact, the stock market was under pressure and the dollar was strengthening. Even Snowflake can’t help. Perhaps this is due to a mixed revision of the Fed's forecasts for the future of the US economy. On the one hand, the central bank now expects the economy to contract 3.7% in 2020, up from a previous estimate of a 6.5% contraction. On the other hand, growth in 2021 and 2022 was revised downward to 4% and 3% from 5% and 3.5%, respectively. Speaking about the Central Banks, we note that today the Bank of Japan and the Bank of England are announcing their decisions. Traditionally, the markets do not expect surprises. So, there is every reason to monitor these event on the background without trying to actively trade the news. In addition, we are monitoring statistics on jobless claims, which can both increase fears about the pace of economic recovery in the US and reassure investors.
FOREXCOM:NAS100Short
by Trade24Fx
2
Preparing for the FOMC meeting results and selling oilYesterday for financial markets started with rather positive information: for the first time in 2020, China showed an increase in retail sales. However, this positive is easily broken by the news about the second lockdown in Israel, the expectation of a second wave of the pandemic in the UK and the general statistics on the number of cases in the world. The fundamental background in the oil market is getting gloomier every day. As if there were not enough problems like price discounts from Saudi Arabia, increased fears about the recovery in demand for oil, a decrease in imports of oil products from China and an increase in oil reserves in the United States last week. The week started with a new negative. Yesterday we already discussed the negative projections of OPEC and British BP, and today they were supplemented by forecasts from the International Energy Agency (reduced own forecasts for growth in demand for oil in the fourth quarter by 600K b / d) and Trafigura Group (the second largest oil trader in world, warning that the oil market is again close to a surplus). To conclude, sell remains the only reasonable option for trading with oil, in our opinion. But with some reservations: another hurricane threatens floods on the US coast, which has already led to the shutdown of a number of oil refineries (production of offshore oil and gas in the US has been cut by a quarter). And the data from the API showed a sharp decline in US oil stocks (by 9.5 million). Wednesday is interesting primarily by the results of the FOMC meeting. We expect for the details of inflation targeting based on average inflation. Recall that the chair of the Fed, Jerome Powell, at a symposium in Jackson Hole announced the transition to a new benchmark in inflation targeting, but at the same time there were no details provided about how the FED will calculate the average inflation rate, for what period, whether a simple average or weighted average will be used, etc. Answers to these questions will give an understanding of the potential speed of the Fed's reaction to changes in inflationary processes in the United States and, accordingly, it will be possible to more clearly understand the future actions of the Central Bank. Also, do not forget about the data on retail sales in the United States, which will also be published today.
Short
by Trade24Fx
1
Mega Deals, Vaccines and the Doom of the Oil MarketFinancial markets started the week in rather high spirits. The growth of positive sentiments was facilitated by the mega-deals news. First of all, we are talking about NVIDIA's agreement to buy the British chip designer Arm from the Japanese SoftBank Group Corp for $ 40 billion. And although there is still ages before the deal is completed (it will take about 18 months to agree on the deal: it must be approved by the United States, China, Great Britain and the European Union) , it may well change the balance of power in the global semiconductor market. In addition, Oracle said that together with the Chinese ByteDance, they will ensure the functioning of TikTok in the United States. Thus, Microsoft has lost the war. Finally, Gilead Sciences has offered to pay $ 21 billion for the biotech company Immunomedics. Information from AstraZeneca about the restoration of the third phase of trials, as well as from Pfizer about the start of the third phase and the promise of the head of the company by the end of October to provide a vaccine ready for production, also contributed to the positive background. It should be noted that the markets traditionally work out not actual news, but future expectations. Because from the “here and now” position, there are no particular reasons for buying. The situation with the pandemic on a global scale continues to worsen, which increases the risks of a second or third wave. And this problem is here and now. Besides, here and now it is unsolvable. Among those who have been consistently unlucky lately is the oil market. OPEC published its monthly report and extremely disappointed oil buyers with the forecasts for global oil demand (expected at 90.2 mb / d, which is 0.4 mb / d lower than previous estimates). And if we add to this the revision of the British BP's strategic forecasts for the peak of oil demand the situation looks even worse. BP expects in the middle of this decade, that the demand for oil will reach its peak, after that it will begin to decline for a long time (oil will be gradually replaced by alternative energy sources). So, in the long run oil market in its current form is doomed.
Editors' picks
TVC:USOILShort
by Trade24Fx
50
Week in a Glance: Trump, ECB, Brexit, Tesla and AstraZenecaThe past week turned out to be quite eventful with all sorts of fundamental events. Starting with the next portion of threats from Trump, ending with the Brexit problems and the ECB meeting. President Donald Trump said he is going to "end" US dependence on China and threatened to punish any American company that creates jobs overseas, as well as to impose "massive tariffs" on imports from China. So now it seems that whoever wins the presidential race (Biden or Trump), the result will not be good for the US stock market. In this light, Tesla's anti-record (the company lost about $ 80 billion in market value on Tuesday) can be considered a kind of warning. But Tesla isn't the only problem. The UK internal market bill has provoked an ultimatum from the EU (and rejected it), and the likelihood of the Brexit negotiations failing has reached its maximum. The pound, accordingly, moved to the minimum levels. The ECB meeting could potentially change a lot in the foreign exchange market, but in fact the parameters of monetary policy were left unchanged, as well as economic outlook in Europe. Although the issue of the euro exchange rate was raised, the Central Bank is not planning to do anything with it so far. So, nothing has been changed dramatically. The US stimulus package continues to be the main concern for US investors. Democrats on Thursday failed a vote on a Republican stimulus package. Global vaccine race leader AstraZeneca has suspended its COVID-19 clinical trials around the world due to an adverse reaction in a trial participant in the United Kingdom. This potentially means we will see the coronavirus vaccine a month or two later. The oil market was also not happy: Saudi Arabia announced the deepest monthly decline in prices for supplies to Asia in five months, and optimism about the recovery in demand decreased amid the peak of the pandemic. So, oil prices were under strong downward pressure. As for the upcoming week, it will be interesting primarily for the meetings of the Fed and the Bank of England. As well as a block of data on retail sales for almost all key countries of the world. In addition, we will follow the news on Brexit and the situation with the pandemic.
Short
by Trade24Fx
2
ECB, jobless claims, US stimulus, Brexit and oil stocksIn terms of news, yesterday was a pretty busy day. And although the world has not turned upside down at the end of the day, it is still worth analyzing what was happening. The main event of the day is the ECB meeting and its decision on the parameters of monetary policy. That is, the markets did not expect any changes, but the latest inflation data pushed the Central Bank to at least additional comments. The parameters of monetary policy were left unchanged. At the same time, the ECB left its own forecasts for economic growth in Europe unchanged. Let us remind, on Wednesday Bloomberg disseminated information that the ECB may improve its outlook. The main positive for the euro was the lack of comments on the use of regulation of the euro exchange rate as one of the instruments of monetary policy. Many feared that the ECB might devalue the euro in order to unwind the inflationary spiral. To sum up, the universe of the euro has not changed by and large. Weekly data on jobless claims traditionally aroused increased interest among financial market participants yesterday. This is understandable - they need a signal that the economy is recovering and has not fallen into a depression. Initial and continuing claims came out worse than expected and showed that the labor market continues to experience problems. In addition, the day for buyers in the US stock market was darkened by a lack of progress between Republicans and Democrats on a new stimulus package for the US economy. What's more, Democrats yesterday flunked a vote on the Republican stimulus package. The day turned out to be extremely gloomy for the pound, as the next round of Brexit talks failed. Meanwhile, the situation on the oil market remains tense and rather uncertain. According to API data, US oil reserves increased by almost 3 million barrels over the week. Official figures from EIA showed an increase of 2 million barrels. This signal is definitely negative for buyers in the oil market.
Long
by Trade24Fx
6
Unlucky week, ECB decision and contango in the oil marketFor many (at least for buyers in the US stock market and in the oil market), the current week has not been the most successful. But as is often the case, one thing follows the other. Looks like the fall in US stock indices and Trump's threats were not enough. This time, India and China contributed to the creation of the most gloomy fundamental backdrop. Sides have already moved on to fire clashes on the disputed border. In addition, AstraZeneca (the leader of the global vaccine race) has suspended the third phase of trials around the world due to an adverse reaction in one of the participants in the United Kingdom. Today the unemployment data in the US may continue the losing streak. In addition, the ECB may surprise the markets with its economic outlook, as well as with the comments on euro exchange rate. Traditionally, Brexit negotiations have been tough. Since the sides have reached the home stretch, the rates have been increased as much as possible and everyone is waiting for someone to sit out. Markets are increasingly being discounted for a possible failure, which naturally puts pressure on the British pound. And if the hopes of buyers of the pound are that the sides will agree, then in the oil market they are more likely associated with the differential between spot and futures prices, which indicates the presence of contango (the price of an oil futures is higher than the current price on the market), which means , the prospects for earnings on oil storage are opening up. This may provide some support to oil prices.
Long
by Trade24Fx
4
Trump threatens, Europe is withering, prices are fallingThe main event that determined the dynamics in the financial markets yesterday was Trump's announcement that he was going to "end" US dependence on China. As an option for the practical implementation of the thesis, the threat to punish every American company that creates jobs abroad was voiced. And of course, us usual, tariff threats were declared. Considering that the markets finished last week in a disassembled state (stock markets were falling, as well as oil prices), such statements only worsened the situation. As a result, the Fear Index jumped 15%, and the US stock market continued to form a correctional wave, which risks turning into full-fledged selloff and a bubble collapse. Europe and Japan, meanwhile, reported results of the second quarter GDP revision. In both cases, the data were formally revised upwards, but overall the data confirmed that the economic situation in the second quarter was unprecedentedly bad. In general, Europe is in a bad shape. The second wave of the pandemic, apparently, is set seriously with all the consequences for the Eurozone economy. So, perhaps, the ECB will not have to intervene in the dynamics of the euro, it will fall on its own. However, the risk of the ECB's interference in the fate of the euro will worry the FOREX participants until Thursday. So, it's not worth buying the euro yet. Even against the British pound, which in the last week is desperately trying to discount the possible failure of negotiations with the EU and a "hard" Brexit. The British announcement that they are already preparing to exit without a trade agreement was made just before the start of the next round of negotiations. A great start for constructive negotiations.
FOREXCOM:NAS100Short
by Trade24Fx
1
Oil failures, Softbank and Tesla problems, Johnson's ultimatumIt seems that with the recent jumps in the US stock market, everything has become completely clear (in fact, no). Softbank was chosen as the last resort (it turned out to be the main buyer of US tech stocks), using options to generate short-term, highly leveraged profits. Well Softbank has become a clear example of what happens to buyers in an overvalued market: its shares fell 7.2% on Monday to their lowest level in two months. And it is far from the fact that this is the bottom. Tesla has been plagued by problems too. Buyers' hopes that the company would be included in the SP500 index were dashed after the index committee did not add an electric car manufacturer to the SP500. So the bears have every chance to build on their current success and drive the company's shares to $ 200 or below. At the start of the week, the British pound was under strong downward pressure. The reason is Boris Johnson's ultimatum: Great Britain is ready to withdraw from the negotiation process if there will be no serious breakthrough in it in the nearest future. The week for oil did not start well. Despite a rather strong decline in US oil inventories last week, the number of active drilling rigs in the US showed insignificant growth. In addition, Saudi Arabia has sharply reduced its oil prices for Asian buyers (the maximum decline in the last 5 months). Well, the situation in the world economy after the failures of India and Australia last week continues to indicate that a quick recovery in oil demand should not be expected. That is, the current fundamental background for oil is rather gloomy, which means that sales should be preferred.
Short
by Trade24Fx
7
Week in Glance: India and Australia, deflation and NFPLast week kicked off with the fact that the S&P 500 ended its best August since 1986. Well, the week ended with the biggest two-day fall in the Nasdaq Index since March. And it is far from the fact that the worst is over for buyers. Rather, on the contrary, the collapse of the bubble may become full-fledged with all that it implies. We have already talked many times about the huge fundamental divergence that formed between the dynamics of prices in the US stock market and its economy. Statistics on the US labor market once again showed that a quick economic recovery should not be expected, which means that the divergence can be eliminated only due to a strong decline in prices in the stock market. The data on the Australia GDP (decreased by 7% in the second quarter, and the country officially entered a state of recession) and India (the drop in GDP in the second quarter was 23.9%, which was the biggest in the entire history of observations) reminded that the economic crisis - this is not a local problem of the United States, but a global one, so external forces are unlikely to help the USA. Another important event of the past week was the information about deflation in the Eurozone. Which provoked the comments of the ECB chief economist that the exchange rate is an important component of monetary policy. Markets took this as a signal of a possible devaluation of the euro. Considering that the next ECB meeting will take place this week, it is likely that the current week will not be the easiest for the euro. In addition, revised GDP data for Japan, Eurozone and Great Britain will be published this week, so volatility spikes in currency pairs with the Japanese yen, euro and pound are also very likely. As for the general situation in the foreign exchange market, the dollar is still under pressure. Despite the heroic retention of 92.20 support line, the downtrend still prevails and while the Dollar Index is below 93.60 its upside potential is limited. Accordingly, we will use any growth of the dollar for now as an opportunity for better sell points.
FOREXCOM:XAUUSDLong
by Trade24Fx
6
Brexit problems, NFP in focus, vaccination dateThe dollar continued to recover yesterday in the foreign exchange market, but for the transition to a full-fledged correction, the Dollar Index needs to strengthen above 93.60. And for this, in turn, today's data on the US labor market should at least not disappoint. But this is doubtful. ADP figures were two times lower than forecasted, the number of jobless claims in August averaged around 1 million on initial applications and 14 million on continuous ones, a consistently weak component of the labor market in basic business activity indices, an increase in the number of bankruptcies - absolutely everything indicates that the US labor market continues to be in bad shape. So, the expectations of an increase in the number of new jobs outside of agriculture by 1.4-1.5 million, in our opinion, is an overly optimistic estimate. Accordingly, we would not be in a hurry to buy the dollar today. On the contrary, the current dollar growth is a good opportunity for its sales. At least as long as the Dollar Index is below 93.60 and the NFP numbers come out weak enough. Among other news, it is worth noting another unsuccessful week of negotiations between the EU and the UK. The EU's chief Brexit negotiator, Michel Barnier, said he was “worried and disappointed” with the UK's approach to the talks and said there was no progress. All of this is fueling fears that the UK will exit the bloc in January without a deal. The US Centers for Disease Control and Prevention, meanwhile, notified states that they should be ready to distribute the vaccine by November 1. In their opinion, the chosen date is needed to ensure that the infrastructure is in place to distribute any treatment when it becomes available. As a reminder, none of the experimental vaccines have yet completed trials. The US stock market yesterday showed the maximum decline since June. Possibly the bubble collapse process has begun.
FOREXCOM:NAS100Short
by Trade24Fx
2
Australian GDP, ADP figures and ECB doubtsYesterday started with the recognition that 28 years of economic growth in Australia has officially come to an end. In the second quarter, Australia's GDP fell by 7%, which was the largest decline in history. Considering that in the first quarter, the country's GDP fell by 0.3%, one can congratulate the Australian economy on the transition to a recession. Meanwhile, the ECB seems to be seriously concerned about the strengthening of the euro (after all, after such inflationary data - recall that at the end of August deflation was recorded in the Eurozone - this is no wonder). At least the ECB chief economist Philip Lane noted that the exchange rate matters for monetary policy. In theory, the ECB could try to devalue the euro locally in order to accelerate inflation without cutting rates or expanding its quantitative easing program. Another important event yesterday, which is especially important in anticipation of Friday's statistics on the US labor market, was the employment data from the ADP. Analysts predicted an increase in the indicator by 1000K, in fact, the growth was 428K. And although the figure itself is several times higher than the average pre-pandemic values, it was below forecast more than twice which is likely a reason for disappointment. Nevertheless, it is not worth making any conclusions and projections on the NFP figures, because statistically, the relationship between the indicators (NFP and ADP): it is direct, but not strong enough (about 20-25%). From other news, we note the lack of progress in negotiations between Democrats and Republicans on a new stimulus package (although Treasury Minister Mnuchin emphasized the urgency of this issue and its extreme importance), as well as Biden's leadership in the presidential race. Both of these factors are rather negative for the US stock market, so we continue to consider its current growth unreasonable and out of touch with reality.
Long
by Trade24Fx
4
Dollar problems, deflation in Europe and recovery in GermanyMost of the Tuesday dollar was under the pressure, having already lost more than 10% from the March highs. Powell's speech last Thursday was essentially a declaration that ultra-soft monetary policy in the United States will last for a long time. Which, in turn, is an exclusively bearish signal for the dollar. So yesterday's walk of the Dollar Index below 92 can be considered logical and rational. At the same time, its further prospects look extremely gloomy: difficult situation with the pandemic, riots and all those BLM issues, the lack of a new stimulus program, uncertainty with the results of the presidential elections, the failure of the economy in the second quarter and the unclear pace of its recovery in the foreseeable future are only a small part of the dollar's problems. This weakness in the dollar, in turn, partially explains why gold is near $2000 and why the US stock market makes new all-time highs every day. By the way this August was the best for the SP500 since 1986 (!). The first deflation in the last 4 years was recorded in the Eurozone. Considering that the GDP of the Eurozone in the second quarter decreased by more than 10%, this signal is rather pessimistic, indicating a potential transition of the recession into an economic depression. Nevertheless, euro yesterday came close to the level of 1.20 paired with the dollar. The reason for this was both the general weakness of the dollar and the statements from the German Government that by the end of 2020 the country's GDP will decrease not by 6.3%, as was expected earlier, but "only" by 5.8%. Although the word "only" is hardly appropriate to describe this situation. At the same time, a return to the pre-pandemic level is expected no earlier than 2022.
Long
by Trade24Fx
1
India failure, Tesla-Apple split, dollar's worst AugustIndia can be considered the main anti-hero of yesterday in the world. On the one hand, it is clearly going to become the first in the world in terms of the number of cases of coronavirus, in any case, there is every chance to take second place, if not this week, then the next, because the number of new cases per day has reached 80K. On the other hand, India's GDP data for the second quarter showed the worst results in the last 8 years. Analysts had expected a fall in GDP of -18.3% against a rise of 3.1% in the first quarter. In fact, the decline was 23.9%. The figure is so terrible in itself that it needs no further comment. Also, analysts expect India's GDP to fall in the third (8.1%) and fourth (1%) quarters. That is, a recession in the Indian economy is inevitable, and a quick recovery in the foreseeable future is unlikely. India is the fifth largest economy in the world, which, moreover, had the highest growth rates during the latest years and, in fact, dragged on itself the world economy as a whole. So, the news is extremely negative. As for other events, for the US stock market these are, perhaps, splits of Apple (4 to 1) and Tesla (5 to 1) shares. Considering that the rise in prices for the shares of both companies is largely related to the hype, it is quite logical that after this high PRed move the shares showed growth. However, it in no way negates the fact that Apple is completely overbought and the Tesla has created a big price bubble. As for the results of August for the FOREX, we note that it has become the worst August for the dollar over the past 5 years. Nevertheless, the Dollar Index, despite all the fundamental negativity around itself, has come close to the rebound point, so it is too early to write it off completely.
ULong
by Trade24Fx
2
Week in a Glance: Powell, Abe's resignation, Hurricane Laura etcThe main event of the past week in terms of medium-term price dynamics in financial markets was the speech by Fed Chairman Jerome Powell at the annual symposium in Jackson Hole. Now inflation targeting in the US will be based on "average inflation". That is, now the Fed will not immediately react when inflation exceeds the 2% target, but will monitor the average inflation rate, reacting in this way much later. Thus, Powell made it clear to the financial markets that ultra-soft monetary policy in the United States is for a long time. This is a negative signal for the dollar. As for the stock markets, this news is extremely positive for them, especially against the backdrop of a possible alternative in the form of statements on tightening monetary policy. Which, however, does not negate the fact of a huge fundamental divergence between prices in the US stock market and the economic reality that has developed as a result of the pandemic. The revised US GDP data was released on Thursday. Although the decline rates were revised upward (up to -31.9%), the data generally confirmed the failure of the world's largest economy. Another landmark event, at least for Japan, was the resignation of Japanese Prime Minister Shinzo Abe. The event caught the financial markets by surprise. The yen strengthened on Friday amid fears of political uncertainty in Japan. Hurricane Laura, which caused so much noise in fact, limited itself to relatively small losses, and most importantly, the oil workers have already begun to return to work. So, oil sales this week continue to be a hot trade idea. The main fundamental positive was the news about the negotiations between the US and China on the progress of the implementation of Phase 1 of the trade agreement between the countries. Despite all the negativity that has recently accompanied relations between the United States and China, the sides expressed satisfaction with the implementation of the agreement, which largely reassured investors. The main event of the coming week will be the publication of statistics on the US labor market. We do not expect much positive news, because the situation with the pandemic in August in the United States, although it improved, was very difficult.
Long
by Trade24Fx
5
Average inflation targeting, Laura and US GDPFundamentally, yesterday was exceptionally busy. The main event was without a doubt the speech by the head of the Fed, Jerome Powell, at the annual symposium in Jackson Hole. Recall that the Fed faced an extremely unpleasant dilemma in case of an increase in inflation: keep on saving the economy and violate its basic function or to regulate inflation, but sacrificing the economy. In the previous report, we noted that the way out of this situation is the inflation target in the form of “average inflation”. In fact, Powell announced the transition to this. That is, now the Fed will not immediately react when inflation exceeds the 2% target, but will monitor the average inflation rate, reacting in this way much later. What does this mean? That ultra-soft monetary policy will last. This is a negative signal for the dollar. But the inability of sellers to push the Dollar Index against the background of this information leaves its buyers hopeful. As for the stock markets, this news is extremely positive for them, especially against the backdrop of a possible alternative in the form of statements on tightening monetary policy. Quite a lot of important macroeconomic statistics were released yesterday. First of all, we are talking about the revised value of the US GDP for the second quarter. No miracle happened. The GDP of the world's largest economy has indeed fallen by more than 30%. Initial jobless claims above 1 mln only exacerbated the effect. Hurricane Laura, meanwhile, hit the US coast. The real scale of the destruction will most likely become clear after the weekend. But it has already been downgraded from a Category 4 hurricane to a tropical storm, so, as we warned, everything is heading towards the fact that the United States will mostly get off with fright.
Short
by Trade24Fx
1
Powell's Dilemma, Laura's 4th Category and jobless claimsToday, all the attention of the financial markets will be focused on the speech of the head of the Fed, Jerome Powell, at the online version of the annual symposium in Jackson Hole. The fact is that the Fed in the foreseeable future may face a dilemma: if inflation rises, the Central Bank should intervene and tighten monetary policy (raise rates, cut quantitative easing, etc.), but in the current environment, when the economy is experiencing a deepest crisis since the Great Recession (often used to refer to the 2007-2009 Global Financial Crisis), this can make matters worse. So, everyone is waiting for the Fed's position on this issue. A compromise option is to temporarily move away from the inflation target in favor of, for example, “average inflation”. This will give the Central Bank time to maneuver, freeing it from the obligation to respond as quickly as possible. In addition, deflation is a potential problem for the Fed, which, coupled with falling GDP, creates preconditions for the economy to go into a depression. In this case, the Fed should use additional monetary stimulus, for example, yield curve control, additional quantitative easing program, moving rates into the negative zone, etc. In total, Powell's speech may well become historical. This, in turn, can provoke an increase in volatility in the financial markets. In the meantime, hurricane Laura got the fourth category and threatens with great destruction and losses. According to experts it can cost about $18 billion, and this is not counting the possible closure of oil refineries for months. However, a more likely scenario is that there will be no catastrophic consequences and everything will quickly return to normal. This means that the growth of oil prices still remains an opportunity for more expensive sales. A telephone call between the US and China appears to have benefited the trade agreement between the countries. At least according to sources, China plans to buy record volumes of soybeans from the United States this year. Today, data on jobless claims in the United States will be published, which is the earliest indicator of the state of the labor market in the United States.
TVC:USOILShort
by Trade24Fx
USA vs China, Laura and Oil, German GDP and business expectationThe main event of yesterday was the telephone talks on the review of the Phase 1 of the trade agreement between the United States and China. Recall that the negotiations were supposed to take place on August 15, but then Trump had another exacerbation of his relationship with China, so he decided to postpone the meeting. But yesterday the meeting took place. And judging by the comments of the parties, it turned out to be quite constructive, or at least not destructive. The sides are ready to comply with the agreement, at least in words. In this regard, the dollar was as usual under the downward pressure, but without the development of a local trend. So, our position is still unchanged: for intraday purposes hourly oscillators can be used and trading can be done without obvious preferences in direction. But at the same time, the dollar should still be sold more aggressively, and be bought from conservative points. In the oil market, news of hurricanes and the shutdown of oil and gas production on the coast line pushes oil prices up. According to the latest information, about 82% of oil production facilities and about 57% of gas production facilities have already been closed on the coast of the Gulf of Mexico. Note that hurricane Marco has already lost its strength, but Laura is set up quite seriously. Given that hurricane season is a traditional event in the area, and also extremely temporary, we continue to see this growth in oil prices as an opportunity for better entry points to sell oil. The revised GDP data for Germany was released yesterday. The outbreak of the epidemic in Europe greatly worried investors, so economic data from Germany was important for them to calm down. We can say that they got what they needed. The GDP decline rate was revised for the better from 10.1% to 9.7%. Ifo's business confidence index also improved slightly. So EURUSD drops below 1.18 is a good buying opportunity within the day.
TVC:USOILShort
by Trade24Fx
Dollar doubts, strategists, hurricanes and vaccine hopesYesterday was not very rich in both important events and any pronounced price movements in the financial markets. The dollar, which was weak during the European session, began to recover during the American one. But in the end, any additional clarity in its dynamics did not appear. In this regard, there are some hopes for a speech by Fed Chairman Jerome Powell at the annual symposium in Jackson Hole. Before that, while the Dollar Index has not left the range of 92.50-93.70, we do not expect for any local trend. Plus the factor of the outcome of the US elections will increase the entropy around the dollar. Most of the market strategists polled by CNBC (14 out of 20) predict a victory for Biden. At the same time, half of them believe that Biden's victory will provoke a fall in the US stock market. According to experts, Trump's victory will give a positive impetus to the stock market. But these are questions of perspective. Here and now the stock markets continue to show growth, and some indices, such as the high-tech Nasdaq, demonstrate historical highs every day. As an informational trigger, vaccine news and their accelerated approval by regulators (when all the necessary tests will be passed) are used. Recall that in the most optimistic scenarios, we are still talking about months before the appearance of the first limited batches of vaccines, so nothing will change here and now. At the same time the total number of cases in the world will exceed 24 million very soon. In the oil market, news about hurricanes on the coast of the Gulf of Mexico and information that a number of companies have stopped production and processing of oil in connection with this threat, provoked an increase in "black gold" prices. But for now, we would consider this only as a reason for better “sell” entry points. Overall, the situation in the oil market continues to be on the side of sellers, since demand is not recovering as quickly as experts expected, and the growth in the number of cases in the Eurozone and a number of other countries raises serious concerns about the future prospects for oil demand. Against this background, the number of active oil rigs in the United States started to grow, that is, American shale producers are beginning to recover, which means an increase in oil supply in the foreseeable future.
Long
by Trade24Fx
6