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Surprise from the Bank of England, ECB decision, hello pandemicThe main global event of yesterday - WHO officially recognized the epidemic of the coronavirus pandemic. This hasn’t changed anything, but once again it emphasizes the seriousness of what is happening just right now. This is supported by yesterday’s decision from the Bank of England to urgently cut the rate by 0.5% (the first emergency decision since the global financial crisis). Despite the fact that this event took the markets by surprise, the pound after falling 100 points quickly recovered losses and even showed new intraday highs. The reason for optimism was the information that the British Government proposed a package of measures aimed to help the economy. Today it is the ECB's turn. President of the Central Bank Christine Lagarde has already stated that European leaders should think about fiscal measures, and not to look towards the Central Bank. It will be interesting today to observe the results of the ECB meeting and what they decide to do there. In general, we expect new reasons for the weakness of the euro and today we will continue to sell it in FOREX. Saudi Arabia, meanwhile, continued to give reasons to oil sales. We are talking about the intention of Saudi Aramco to increase oil production to 13 million bpd (now they produce about 9.7 million bpd), which essentially means flooding the market with oil. We observe what is happening with interest, but keep our heads cold. What is happening now in the oil market is a great opportunity to build an extremely promising and profitable position. We consider what is happening now in the oil market a temporary phenomenon, and current oil prices are deviated from equilibrium (are undervalued). Accordingly, our medium-term plan is to buy oil from $ 30 (WTI) with an addition to the position every $ 5 down. This position will definitely require patience, as well as funds to keep it alive. But we have no doubt about its final positive outcome. Note that the medium-term purchase does not cancel the intraday sells of the asset to trade in the current trend, to work out a fundamental negative such as yesterday's statement by Saudi Aramco or data on oil reserves in the USA (increased by 7.6 million over the week).
Short
by Trade24Fx
1
Fear still dominates markets, as well as the number of problemsDynamics of different assets yesterday can be perceived as an attempt by the markets to exhale: prices for gold and Japanese yen declined, the oil was rising. But do not treat it as everything is OK now. The current fundamental background remains extremely negative with a downward trend. The problems of Italy (the general lockdown in the country with all the ensuing losses for the economy) so far look like the beginning of a series of problems. Next in line are Germany and France. That is, the epidemic is hitting the heart of the Eurozone economy. In this light, we focus the attention of our readers on the advisability of selling the euro on all fronts. Yesterday's decline in the EURUSD pair has already made it possible to earn about 200 points to those readers who listen to our recommendations, but this is far from the end. In general, events continue to evolve. The Fear Index (VIX) at its highest levels since 2008 indicates how serious everything is. What can make a difference? First of all, incentives from leading countries. For example, the probability that the Fed will reduce the rate by another 0.75% next week is 84%. Trump announced the adoption of extraordinary measures to support the country's economy as well. This is all good, but in the final bill, you have to pay for everything. Who will pay for all these beautiful measures? In general, it is clear - public debt. US debt is already bloated to indecent. And a good way out of the situation is not yet visible. So we continue to sell in the stock markets, sell commodity currencies and emerging currencies, we sell euros. We continue to work with a pair of positions buying gold / buying USDJPY. In the oil market, meanwhile, there is a strong backstage fight. The most likely outcome, in our opinion, is that the parties (OPEC and Russia) will find a compromise. The only question is when. The answer to it is not obvious, but when such news appears, oil will give the same 30%, but in upward direction. So, strategically, oil can start to be bought already near $ 30 (WTI) with additions near $ 25. But tactically, of course, the downward pressure will dominate until the situation is resolved.
Short
by Trade24Fx
But what if the markets are wrong: lets fish in troubled watersThe start of the week plunged many into a state of deepest stupor. Over the past six months we have already devoted dozens of reviews preparing our readers for the onset of global problems and the collapse of bubbles in risky asset markets. The most wrong thing a trader can do in such a situation is to lose an adequate perception of reality and rush into the pursuit of the market. We urge our readers to remain calm and analyze the situation as openly as possible. Let’s take as example the oil market. Yes, here and now the situation looks completely hopeless. But by and large, all this we already seen in 2014. Situations, of course, are not identical, but in many ways they are similar. So, we can try to draw historical parallels and predict the future development of events and market prices. What happened when the last time oil prices went below $ 30 (WTI)? By the will of the key oil market participants, the current reality at that time was changed (meaning the signing of the first OPEC + agreement). Actually, here and now everything can be repeated. It is not so difficult to imagine the situation of the OPEC + emergency meeting already at the end of this or next week, at which Russia agrees to cut the production and the situation will turn upside down. Given how dependent the Russian economy is on hydrocarbons, this is the only reasonable option for a country if it does not want to become a second Venezuela. That is, banal logic suggests that selling oil at current prices is a very risky thing. But purchases, on the contrary, are promising. Similar thoughts can be presented for the US dollar. Beating of USD in the FOREX, given the current form of the US economy and other countries is undeserved. Yes, the Fed has already lowered the rate, and the ECB has not yet, respectively, the rate differential has narrowed, but it is still in favor of the United States. At the same time, new historical lows on the yield of US treasury bonds indicate that demand for dollars is not falling, but, on the contrary, is growing. That is another logical contradiction that makes us think that the markets are wrong. The experience of the year 2008 shows that the insanity into which markets plunge headlong is a relatively short-term phenomenon. And ultimately, common sense returns. We have no particular doubts about this. The only doubt is timing. That is, when everything returns to norm. Of course, go against the market without stops, trying to impose your will, is potentially a margin call. But at the same time, following your line without fanaticism and with reasonable stops will make it possible in the end not only to catch a local correction, but to be at the origins of a big movement. That is why today we will continue to follow our basic plan: sell EURUSD, buy USDJPY with simultaneous purchases of gold (all positions with hard and rather short stops), sell in the US stock market, and sell the Russian ruble as well.
Short
by Trade24Fx
The NFP and the OPEC data & few reasons for pessimismFriday promises to be an extremely eventful and interesting day. On the one hand, statistics on the US labor market will not let you get bored in the currency and stock markets, and on the other hand, the results of the OPEC meeting will determine the dynamics in the oil market. We will talk about this and much more in today's review. But let's start traditionally with news about the coronavirus. As the number of cases in the world grows, measures to contain the epidemic are tightened. Italy closes schools and restricts public gatherings. Companies continue to revise their forecasts for financial results. Quite frightening figures were noted by the International Air Transport Association. According to their experts, the industry’s losses from coronavirus may amount to $ 113 billion. And there are already the first victims of this. Chinese Tourism and Financial Conglomerate HNA Group Co. was taken under state control. That is, in fact, the company ceased to exist as an independent entity. Indicative in this case is the fact that one of the main reasons for the fall of the company was its high debt cut (about 85 billion). The evidence is that this is generally very typical of Chinese companies (overblown debts). HNA Group Co. clearly demonstrated how quickly one of the fastest-growing companies can go bankrupt. In general, there are enough reasons for pessimism. Realizing the impasse of monetary incentives, more and more countries are using fiscal instruments (mainly increased government spending) as a measure to combat the effects of coronavirus. Asian countries are so far ready to pour in up to $ 40 billion, and the United States - about $ 8. They are also trying to fight the consequences of coronavirus in OPEC. Today there is an attempt to carry out the following agreement: to withdraw from the market another 1.5 million b/d with a minimum of the end of the second quarter. So far, Russia remains a stumbling block. If she can be persuaded, a very serious reason for price increases will appear in the oil market. So today we will buy oil in the hope that everyone will agree. The deal seems to be quite good, if only because the stops are relatively small (places below 44 or closes on the fact of negative news), but the profits are very ambitious (an increase of up to 57 or even higher for the WTI brand). The key event of the day for other financial markets will be the publication of statistics on the US labor market. Since the data will be for February, there is a risk of failure in the numbers of NFPs in connection with the coronavirus epidemic. However, the dollar has already lost quite a lot in the foreign exchange market, and the data from ADP came out unexpectedly good, so today we will buy the dollar.
TVC:DXYLong
by Trade24Fx
2
What does a market reaction to the Fed's decision say?Since yesterday, by and large, was the first full day of working out the Fed’s emergency decision to lower the rate by 0.5%, today some results can be summed up. And they are generally disappointing for optimists. In theory, stock markets should have perked up and provoked a sharp increase in stock indices. But this did not happen, that is, there was growth, but not at the scale that could be expected. In theory, the pressure on the dollar should have intensified. But yesterday, the Dollar Index rose. In theory, the Fear Index was to drop significantly. But according to the results of yesterday, the decrease was insignificant. What are all these signals talking about? The magic of Central banks no longer works the way it used to. Lower rates no longer automatically resolve existing problems. And this is a very alarming signal for stock market buyers, gold sellers, and other optimists. It seems that the bubble is nevertheless broken and the air, despite all the efforts of its creators, is gradually coming out. In general, monetary policy has exhausted itself and this is an extremely alarming signal: if the situation worsens, it will not be possible to resolve the situation with the usual methods. The consequences of the coronavirus have not even begun to appear, and Nasdaq is quoted 10% below the maximum and, it seems, can no longer grow with the certainty with which it was literally a couple of weeks ago. So in everything that happens, we see the strongest confirmation of our basic investment ideas: sales on world stock markets, and especially on the US stock market; gold purchases and sales of risky assets (such as the Russian ruble). But back to the events of yesterday, which was very full of news. The Bank of Canada lowered the rate immediately by 0.5%. The Canadian dollar obediently worked this out, losing about 100 points paired with the dollar. But in general, the reaction was relatively calm at such a massive reduction in rates. US employment data from ADP turned out to be quite good: +183K with a forecast of +170K. What sets in a positive mood against the dollar ahead of Friday's official statistics. The ISM Index in the non-productive sphere also pleasantly surprised: 57.3 points with a forecast of 54.8 points. But the Eurozone indices traditionally fell short of expectations and for the most part, came out worse than forecasts. Well, the results of super-Tuesday played into the hands of the dollar, on which Biden won quite unexpectedly, who is considered a more adequate option from the Democrats as opposed to the “left” Sanders. In general, our desire to sell a pair of EURUSD intensified up to the recommendation to sell the pair from the current ones with the addition of any attempt to grow. Oil stocks in the United States have grown quite slightly, but all the attention of oil market participants has been riveted to the OPEC meeting and OPEC+ decisions. It is very likely that today some specific information will appear that could provoke strong movements in the oil market. If OPEC+ decides on additional reductions (ideally about 1 million b/d), oil has a chance of growth. The main stumbling block is Russia and its unwillingness to scale up the reduction.
by Trade24Fx
Fed`s surprise, coronavirus chronicles, ADP numbersThe main event of yesterday was the Fed’s decision to urgently reduce the rate by 0.5%. The central bank did not wait on March 18 and caught many by surprise. The reaction of the financial markets as a whole seemed logical: the US stock market went up, the dollar was falling, gold was growing. The whole question is whether these trends will continue. We practically do not doubt gold and put on its further growth. The US stock market may well grow by a further wave of optimism by a few percents. But the closer he gets closer to historical highs, the stronger will be our desire to sell. The dollar will be able to take revenge on Friday, but more on that below. In the meantime, we traditionally continue to review the news from epidemic fronts. The epidemic in China has virtually disappeared (130 new cases), but in the world, everything is in full swing (almost 2000 new cases per day). G7 countries, meanwhile, held an emergency meeting at which they firmly decided to confront the economic consequences of the epidemic. Inspired by this news, as well as information about a possible massive easing of monetary policies around the world (the Central Bank of Australia also lowered the rate yesterday and thereby confirmed reasonable expectations), investors again breathed a sigh of relief and rushed to buy cheaper assets. We traditionally do not share this optimism and consider it clearly premature. The consequences are just beginning to manifest. So in the next month, depressing news will be enough. On the foreign exchange market yesterday there was a certain return of common sense. In terms of the fact that the euro stopped growing at the end of the day (even against the background of information about the Fed’s rate reduction of 0.5%), the pound seemed to have found some ground under its feet. All the attention of traders is focused on the first rand of trade negotiations between the EU and the UK. The results will not be earlier than Thursday. So far, we generally consider all this to be nothing more than noise, which can only give the best entry points. Really, nothing will be solved now, which means you should not worry about anything. Recall that our position on the pound is medium-term purchases. Justification - The EU and the UK will eventually be able to agree again. As for the euro, it seems that there was a less clear explanation for its growth in recent days. In addition to the classic for almost any strong movement of triggering stop loss and buy-stop, analysts call the curtailment of the trade due to the coronavirus epidemic as the main reason for the sharp strengthening of the euro against the dollar. For those who are not in the know, we explain that the ultra-low rates in the Eurozone made it possible to borrow money there and invest them in markets with higher returns (for example, the USA). Which naturally led to a depreciation of the euro. Curtailment is marked by opposite trends, respectively, the euro strengthened. Rumors that the Fed will sharply reduce the rate in March and may reduce the rate even later in 2020 provoked the start of the process of curtailing the trade, which was especially clearly reflected in the EURUSD pair. News about the epidemic has recently monopolized the information space so much that it’s easy to miss important news that does not have the word coronavirus or something like that in the headline. We mean that on Friday statistics on the US labor market will be published. This news is traditionally one of the main ones for financial markets. Considering how sensitive markets are now to any deviations from the norm, these data are of increased importance. But the numbers on the NFP will be published only on Friday, but for now, today we are waiting for data from ADP.
Short
by Trade24Fx
China problems, Central Banks & euro riseThis week begins to give a first idea of ​​the economic consequences of the epidemic (so far in the context of China). We are talking about the manufacturing PMI index for China, which fell to 35.7 in February (compared to 50 in January). The non-manufacturing index came out even worse, showing a value of 29.6 (the lowest in history). Recall that any value below 50 indicates a decrease in economic activity. And this is only the first swallow. Then there will be new indicators, and each of them will plunge financial markets into an ever greater depression, at least for some time. Meanwhile, in China itself, the epidemic continues to decline rapidly. In Wuhan (the epicenter of the epidemic), they even began to close the first temporary hospitals due to the lack of patients. But the relay race in China is confidently intercepted by the world as a whole. South Korea, Italy, Iran - current epicenters, which are also not localized, but, on the contrary, spread the virus to other countries. If we draw an analogy with China, then at best for the next month we will find exclusively disappointing news. So you should not count on something good from March. Accordingly, the outcome from risky assets is likely to continue, respectively, gold and other safe-haven assets will find fundamental support. This week we will continue to use the bundle of buying gold - buying USDJPY as a promising medium-term position. In our opinion, the strengthening of the yen, if it continues, will be limited, but the opportunities for gold growth look much more extensive in this regard. Our disbelief in the significant strengthening of the yen is due to the fact that Japan is experiencing serious economic difficulties and traditionally one of the components of the equation to solve them was the devaluation of the yen, so the Bank of Japan is either around 107 or about 105, but most likely it will intervene and prevent the yen from strengthening. In general, central banks are again in the spotlight. Everyone expects salvation from them. As it was during the crisis of 2007-2009. So far, they live up to expectations, since all key central banks have noted rather aggressive statements about their readiness to act. Markets traditionally focus on the Fed. This is mainly due to the current difficulties of the dollar and the frank success of the EURUSD pair. With each new hundred growth points of EURUSD, our desire to sell a pair grows stronger, as does our desire to increase transaction volumes for sale. Part of the dollar’s problems lies in the plane of the presidential election. We try to minimize the analysis of the political plane, focusing on the economy. But today is the so-called Super Tuesday. The day when 1344 of the 1991 Democratic Party delegates cast their ballots for a particular candidate. So far, Sanders is the undisputed leader (probability of victory = 57%), but Biden still has chances (probability of victory = 31%). So the day for the US political sphere is very significant. The pound was under pressure yesterday due to the negotiation process between the UK and the EU on a trade agreement. There is already a familiar game of tug of war and trade for the best conditions, tied to mutual threats. As in the case of Brexit, we prefer to see not the current noise, but the perspective. And it is such that the parties are likely to agree in one form or another. Accordingly, the pound will receive its positive sooner or later. So in the medium term, we do not see any problems for medium-term purchases of the British pound. Rather, on the contrary, we see good shopping opportunities. In current conditions, sales of the EURGBP pair seem ideal to us.
Short
by Trade24Fx
2
The week results: the epidemic & the Friday bloodbathThe past week has so far been considered the most eventful of the last few months. And the point is not even in the number of new events that took place, but in the price dynamics in the financial markets. One of the strongest drops in the US stock market in history (during the week Nasdaq lost up to 15% of its capitalization), the Fear Index grew almost three times, the oil decreased by almost 20%. The culmination was a natural "blood bath", which was arranged by traders in the financial markets on Friday, when, for example, gold was reduced by $80 during the day. How did markets get to such a life? We wrote about this quite actively for more than six months and now we are faced with the results of those temporary bombs that were planted. Epidemic coronavirus is still able to be a "black swan", which freed all the energy that accumulated markets. More precisely, not all, because it is still only in the process of development. The main event of the past week - the coronavirus epidemic ceased to be a local problem in China and became a global disaster (the number of newly diagnosed cases outside China steadily exceeded the number of cases in China). It was after this that investors became completely scared. And if the week began with the fact that the problems were in South Korea, Japan, Italy, and Iran, then it ended with a radical expansion of the list. Now it has the USA, France, Germany, Spain, Great Britain, Singapore, Malaysia, Kuwait, Bahrain, and many others. The total number of cases in the world over the week has grown significantly and has already exceeded 7,000. Naturally, now no one has any doubts that the world economy will suffer and will suffer very much. Out of habit, everyone turned their eyes to the Central Banks, which have recently been playing the role of traditional savers of the economy. Fed Chairman Powell said at the end of last week that the US Central Bank is ready to act. Accordingly, the markets instantly rebuilt their expectations and now assess the probability of a rate cut in March at 100%. Typically, 95% of traders expect a decline of 0.5%. So the problems of the dollar on Thursday and Friday are generally understandable. One side. On the other hand, other central banks, in particular the ECB, may also lower rates. Thus, we continue to consider the growth of the EURUSD pair abnormal and this week will be very active in selling the euro against the US dollar. Not forgetting, of course, about the feet. In general, in the current conditions, when the most terrible volatility has increased many times, a trader can do it - work without stops and try to impose his will on the market. So we’ll definitely put the stops - it’s better to re-enter the position when the dust settles, rather than stand against the market and lose the deposit in one day, essentially out of the blue. What else do we plan to do this week? Definitely buy gold and at the same time buy a pair of USDJPY. It’s a kind of under-hedge on safe-haven assets that did absolutely nothing on Friday, but we believe that the markets will return to some semblance of rationality and this hedge will work. This week, we are inclined to start buying oil, because a) the achievement of the $ 44 mark for the WTI brand corresponds to our goals, which we announced when it was still in the region of $ 60; b) OPEC is seriously concerned about what is happening, and this week there will be a meeting within the framework of which amendments may be made to the OPEC+ agreement - they announce an additional reduction in oil production by 1 million BPD. It is very serious. But again, these purchases are a rather risky attempt to catch a U-turn, which is not yet available. So we advise fans to take risks, do not forget about the stops, and we recommend that conservative traders put the oil trade on hold or at least wait until the end of the week and OPEC's decision.
Short
by Trade24Fx
Beating continues, what to do with euro, yen & poundYesterday was largely typical of the current week: investors continued exodus from risky assets and increased positions in safe-haven assets. Perhaps the main result of the day can be considered the return of the yen to the fold of safe-haven assets. Recall that last week, after the devastating data on Japan's GDP, there was talk that the yen could no longer be a full-fledged refuge. But, judging by its growth yesterday, it’s quite possible for itself. True, such a strong growth of the yen raises questions, but are its buyers too carried away? In the end, no one canceled the failed GDP data, as did the fact that the country was one step away from the recession. So today we are inclined to look for points for purchases of a pair of USDJPY. Meanwhile, a survey of European companies operating in China showed that 577 out of 577 respondents surveyed expect their performance to worsen due to the epidemic and the downtime of the Chinese economy. The results, although obvious, are no less indicative of this. The epidemic continues to expand around the world (the number of new cases in the world steadily exceeded the number of new cases of infection in China) and the point is not even the increase in the number of new cases, but the fact that an increasing number of countries are taking certain preventive measures, including restricting travel, school closures, etc. All this, ultimately, will lead to an increase in the scale of economic losses. Well, the list of companies that have publicly announced the deterioration of their financial results in the future has been replenished with such titans as Microsoft, Anheuser-Busch InBev, etc. Actually, as we predicted in our previous reviews. Investors, meanwhile, are urgently reviewing their expectations regarding the actions of the Central Banks. In particular, 90% of traders expect a Fed rate cut in April. So yesterday's dollar difficulties in the foreign exchange market are generally understandable. Nevertheless, the growth of the euro against the dollar seems very abnormal to us and we are inclined to sell a pair of EURUSD today in double, if not triple volumes. Recall that the Eurozone economy continues to experience serious difficulties, and this is still without the consequences of a coronavirus. The situation in Italy also does not contribute to the purchase of the euro. Therefore, we sell the euro against the dollar at full capacity. As for the general list of our positions for today, it is generally unchanged: we are looking for points for buying gold (but we are careful - we buy on the slopes with mandatory stops), we sell oil, we sell EURUSD, we buy GBPUSD. The only sales of USDJPY today we are replacing with the purchase of a pair with small stops.
by Trade24Fx
China is slowing down, the US homes sales are growingYesterday was notable for the fact that for the first time in an epidemic, the number of new cases in China was lower than in the rest of the world. On the one hand, this indicates a reduction in the epidemic in China, and on the other, the continuation of the deterioration of the situation in the world. Since the situation with the epidemic in China is improving quite rapidly, we can begin to summarize its preliminary results. And although it’s too early to talk about specifics, some estimates can be obtained already here and now. These are the so-called early response indicators. For example, Bloomberg calculates 8 early response indicators for China. So 5 out of 8 in February decreased. But this is not the worst. The February indicators of business confidence fell to the lowest values in the history of observations. Business can be understood: the sales of new cars and real estate in China fell by more than 90%. Bloomberg data is also confirmed by a monthly study of the health of small and medium enterprises in China. The results are record low in the history of such studies. As for the more classical metrics, it is expected that China's GDP growth will decline to the lowest levels since 1990. Goldman Sachs, for example, expects China's GDP growth in the first quarter by only 2.5%. A sharp slowdown in the economy is frightening not only by the fact of the slowdown but also by the problems that it carries: rising unemployment, increasing bad debts, increasing bankruptcies, falling financial results of companies, decreasing domestic demand, etc. Speaking of official statistics, the first signals will appear on February 29, when the February PMI for China will be published. As expected, it will fall to the lowest levels since the global financial crisis (while some experts predict even lower values). Yesterday's data on sales of new homes in the USA looked rather provocative against this background: in January they grew by +7.9% to 764,000 with a forecast of +3.5% to 718,000. However, we will see what will happen there in February, especially in light of the Center’s warning the United States Disease Control and Prevention Regarding the threat of a possible spread of the virus throughout the United States. In general, the situation continues to be tense and for any positive, whether it is a decrease in the number of patients or the development of a vaccine, there is a negative right there (problems in the economy of China and the world, the spread of the epidemic, sales on stock markets, etc.). Accordingly, we do not see any reason to radically change anything in the trading plan. So today we are looking for points for buying gold (but we are careful - we buy on the slopes with mandatory stops), we sell oil, we sell EURUSD, we buy GBPUSD, we sell USDJPY with small stops.
Short
by Trade24Fx
Epidemic is fading & expanding, the Germany recessionThe basic news background is still unchanged: the number of new cases in China is decreasing (+/-500 per day), that is, the epidemic is decreasing. But this is offset by an increase in the number of cases outside of China. And an epidemic from local is increasingly striving to become global. Lockdown in Northern Italy, panic in Iran, growth in the number of cases in South Korea (already under 1000), lower forecasts for financial results from leading companies - all this puts pressure on risky assets, the outcome of which continues. Experts continue to voice new estimates of the damage caused by the epidemic to the global economy. For example, at Oxford Economics Ltd. voiced a specific damage figure: minus $1 trillion of global GDP. Recall that the damage includes direct losses from the downtime of the Chinese economy, losses in tourism and entertainment, as well as in the destruction of global supply chains, a decrease in global trade and investment. At the same time, news about the development of an effective vaccine (the release is scheduled for April), as well as about the desire to allocate about $ 2.5 billion to the Trump administration to fight the epidemic and develop a vaccine, helped to temporarily defuse the situation, which made it possible yesterday to buy gold at great prices. In general, the tactics of buying gold on the slopes proved to be quite effective. So today we will continue to use it, especially since yesterday gave clear price guidelines - where the price might go. Macroeconomic statistics naturally continue to remain in the shadow of news about the epidemic. Nevertheless, we continue to monitor the state of the global economy. Germany reported yesterday on GDP growth rates in the fourth quarter of 2019. Growth turns up zero. Thus, the recession in the leading Eurozone economy was delayed for 3 months. But it looks almost inevitable. Saudi Arabia, meanwhile, pretty upset buyers in the oil market. The point is that OPEC+ was never able to agree on anything. Against the background of expectations of a decrease in oil demand in the world, the news looks like a bearish signal. Recall that we recommend looking for points for oil sales - the fundamental background is so far extremely negative. Well, do not forget to sell euros on growth, as, for example, this could be done yesterday. The economic situation in the Eurozone looks extremely unsightly, and the visit of the coronavirus to Italy (over 200 patients) makes the sale of the euro, in our opinion, an almost risk-free transaction. Our basic positions today are unchanged: we are looking for points for buying gold (but we are careful - we buy on the slopes with mandatory stops), we sell oil, we sell EURUSD, we buy GBPUSD, we sell USDJPY with small stops.
FOREXCOM:XAUUSDLong
by Trade24Fx
2
Markets scare and there is something to be afraid ofOn Monday, the markets were finally really scared. The coronavirus epidemic is becoming global, and the economic consequences are increasingly threatening. Every day, China's downtime literally increases the problem exponentially. Actually, some analysts are already talking about the critical level of problems and damage. For example, a survey of managers of more than 1,500 Chinese small and medium enterprises (small and medium enterprises accounted for 99.8% of all companies registered in China and 79.4% of all employees work in them) showed that 85% of them will use up all their cash reserves in 3 months. But this is a potential threat. As for the real ones (that is, the damage that has already been done), 50% of respondents said that an outbreak of coronavirus will reduce their annual profit by at least 50%. And according to the latest Dun & Bradstreet research from the list of Fortune 1000 companies, the main supplier is China for 163 companies, and for 938 China is a second-tier supplier, that is, their main supplier depends on supplies from China. Thus, the level of dependence of the world economy on China is critical - about 94% (!). Accordingly, the problems will increase like a snowball. And lowering Apple’s forecasts last week will seem like an innocent joke compared to what the global economy can really expect. In the best case, corporations will sag strongly in profits, and in the worst, they will greatly sag in income. Not surprisingly, the Fear Index (VIX) showed 50% growth during the day. It is rather surprising that he has not grown recently. And the gold maximums in the region of 1700 - this is not all that the asset wanted to say on this subject, and sales on the global stock markets by and large just started. The yield on thirty US Treasury bonds, meanwhile, reached a historic low. Which, in general, explains why the dollar has recently felt so confident in the foreign exchange market. Our basic positions today are unchanged: we are looking for points for buying gold (but given the strong oversoldness of the asset, we are doing this conservatively and with obligatory stops), we sell oil, we sell EURUSD, we buy GBPUSD, we sell USDJPY with small stops.
FOREXCOM:XAUUSDLong
by Trade24Fx
The week results: the epidemic swing, the yen statusThe coronavirus epidemic continued to be the main focus of financial markets last week. And if the week began with a rather optimistic attitude of investors against the background of a decrease in the number of new cases of disease and deaths, then it ended on a very minor note: the epidemic spread to South Korea and Japan. In addition, analysts after the warning increasingly began to think about the consequences of the epidemic and quarantine in China (Goldman Sachs estimates that economic activity in China does not exceed 50%). And the longer restrictive measures last, the worse the mood of investors. They can be understood: dozens, if not hundreds of millions of Chinese, temporarily do not work and lead an exclusively isolated lifestyle. As a result, production does not work at full capacity, the transport system is partially paralyzed, consumption has fallen sharply, the clouds over global supply chains are gathering more and more with each day of downtime. That is, an economic epidemic is beginning, which could very well become a global pandemic. Not surprisingly, against this background, gold is updating the highest mark since the beginning of 2013 and continues to confidently move to the 1800 area. The current week in terms of the epidemic is likely to change its focus. If before that all attention was focused on China, and the whole epidemic was geographically localized. Then this week, investors will focus not so much on China as on other countries where the number of diseases has risen sharply: Japan, South Korea (last week the number of cases doubled almost every day), Italy and Iran. Judging by the current dynamics, it is likely that the reserve of bad news has not yet been exhausted. As a result, the stock markets finally broke down and rained down. It will be difficult to say whether the current sales will become the beginning of a full correction, but there are all the prerequisites for this. Another injured last week was the Japanese yen. After the failed data on GDP growth rates in the 4th quarter, everyone realized that the third-largest economy in the world is one step away from the recession. As a result, the status of the yen as a safe-haven asset is damaged. However, we will not write off the yen from the accounts and will sell it within the day simply because the pair climbed very high (with mandatory small stops because we are reporting that we are going against the will of the market). Europe has traditionally already disappointed in terms of macroeconomic statistics and the general state of affairs, especially in Germany. Accordingly, the talk of a global recession against the backdrop of the problems of Japan and the Eurozone no longer seems fabrications and conspiracy theories. For fairness, we note that on Friday the data on business activity indexes in the Eurozone came out better than forecasts at the highest levels for the last 6 months, but so far this is only a drop of positive in a sea of negativity. In the UK, production growth generally showed a 10-year high, which allowed the pound to perk up and work out our recommendation on its purchases. As for macroeconomic statistics this week, the week promises to be quite calm. So you can focus all your attention on the news about the epidemic and expert estimates of the extent of damage both for China and the world as a whole. Our basic positions for the current week are as follows: we are looking for points for buying gold (but given the strong oversoldness of the asset, we are doing this conservatively and with mandatory stops), we sell oil, we sell EURUSD, we buy GBPUSD, we sell USDJPY above 112 with short-stops.
by Trade24Fx
Investors doubt and China operates at half capacityBefore investors could relax and believe that the worst was over, a new portion of reasons for concern arrived. It is about spreading the epidemic outside of China. Recall that almost 99% of everything related to COVID-19 took place in China. And investors at some point decided that everything that happens in China remains in China. Yesterday forced some to reconsider their position. The number of people infected in South Korea rose sharply (it jumped from 32 to 82 in a day, but more importantly, most of the newly diagnosed cases were parishioners of one church, where about 1,000 people were present at the time of infection, that is, we can expect a further increase in the number infected) and Japan (more than twice as many as 84 people jumped in a week), the first deaths appeared in Japan and Iran. All this makes us think about the spread of the epidemic around the world with all that it implies. By the way, about the resulting. China very clearly demonstrates what price has to be paid. Goldman Sachs experts analyzed data on a number of direct and indirect indicators, in particular, statistics on finished goods production, demand for steel and its reserves, coal consumption and real estate sales in China, and a number of other indicators, and concluded that economic activity in China does not exceed 50% of the average indicators of past years. That is, as we warned, it is too early to relax, the events are still in the process of development, and their consequences will become clear only after some time. Against this background, gold traditionally feels comfortable, which continues to stubbornly move towards the goal that we voiced a few weeks ago (1800 mark). But the yen’s problems continue and there are active rumors in the market that the currency is losing the status of an asset-refuge. Despite the current problems of the yen and the high likelihood of its further decline, sales of the USDJPY pair above 112 look too tempting to not try to catch a u-turn with small stops. Moreover, today is Friday - potentially the day of profit-taking. And the yen has something to fix. Considering how depressing statistics have recently been from the Eurozone, one can expect another batch of weak data from Europe and a new round of euro sales. So you can even sell the EURUSD pair without waiting for the data. In addition to the euro, today we will sell oil, a pair of USDJPY (above 112), buy GBPUSD with small stops, and also look for opportunities for buying gold.
Short
by Trade24Fx
The yen could not stand it, investors relaxed againYesterday was the day of reckoning for the Japanese yen. We already wrote this week about the failure in the country's economy, but we perceived the lack of reaction of the foreign exchange market as the general inability of the yen to fall due to increased demand for safe-haven assets (see the dynamics of gold prices). As yesterday showed, we were wrong. The markets harbored a strong grudge against the yen, but they lacked reason. After another wave of optimism arose in connection with the improvement of the epidemiological situation and measures to stimulate the economy from China, the yen strongly recalled everything. How deservedly the Japanese currency has suffered is a moot point, but the fact remains that the yen lost a lot yesterday. Although, again, in terms of facts, then 2,000 deaths (+136 new) and 75,000 (+1872 new) cases of infection are no reason for optimism to grow. But the yen was sold, and US stock indexes updated another historic high. What is happening in the financial markets continues to be puzzling, because, looking at the dynamics of gold, there is a feeling that investors are worried about the coronavirus and its consequences, but an analysis of the yen and US stock index charts suggests that the epidemic is a definite plus for the world economies and a reason for purchases even in excess of overbought assets. Meanwhile, inflation in the UK, USA, and Canada was above forecasts. This, by and large, was to be expected: it is impossible to inflate markets with money without consequences for years - sooner or later the time of reckoning will come. It is likely that we have the first signals. Just in case, we note that central banks will be required to respond to rising inflation. They will do this by curtailing the operations of quantitative easing and other cash injections, for example, in the repo market, as well as by raising rates. Rising rates will provoke a chain reaction in the economy and lead to the collapse of bubbles. If 3 years ago, the Fed clearly hoped to gradually blow out a bubble in the US stock market, now it has clearly given up on this hand. That is, the explosion will be very loud. However, so far the markets do not care about this, but now they do not care. I do not care that Apple will fail the first quarter in financial results, that Adida’s economic activity in China has fallen by 85%, that the head of the IMF calls coronavirus the main threat to the global economy, as well as hundreds and thousands of other facts. Going against such a train is generally ungrateful. But to buy Nasdaq above 9700 with such a fundamental background, the hand categorically does not rise. Perhaps the only option to save the rest of common sense in trading and not to merge the deposit is intraday trading with hard stops. So today we will sell oil, USDJPY and EURUSD pairs, buy GBPUSD with small stops, and also look for opportunities for buying gold.
Short
by Trade24Fx
1
Apple’s panic, German disappoint, inflation dataThe main event of yesterday, which set the pace for the dynamics of the main financial markets, was Apple's announcement that the company was unlikely to be able to achieve its sales forecasts. The reason is, of course, the coronavirus epidemic in China. The news, in general, is obvious, but since the madness of total optimism has long owned the markets for a long time, investors did not want to face facts to the last - China's problems are problems of the whole world. And Apple essentially stated this. Against this background, gold rose above 1600. However, we recommend buying gold for a long time and persistently and so far do not see any reason to change the vector. We note that the yen continues to remain in place. Although given the disastrous GDP data that we talked about yesterday, this is not strange. Nevertheless, sales of the USDJPY pair continue to be a promising deal, at least until it is below 110.20. The epidemic, meanwhile, continues. According to the results of yesterday, +1900 newly diagnosed and about 100 deaths. So, although the growth rate of sick and dead is decreasing, it is still high enough to restrain China in its attempts to return to a full recovery in economic activity. Another unpleasant news yesterday was the publication of the ZEW expectations index for Germany. The data came out extremely depressing: +8.7 points with a forecast of +21.5 points and a January value of +26.7 points. The largest economy in the Eurozone is rapidly following Japan towards a recession. For the euro, this was another blow that sent the single European currency to the lowest mark since 2017. In general, the euro situation looks worse than ever, so we continue to sell EURUSD, EURGBP and EURJPY pairs. There is still much to fall. Data on the labor market in the UK came out pretty good yesterday: employment was higher than expected (+180,000 with a forecast of +148,000). In addition, the pound was supported by the new Minister of Finance of the United Kingdom, Rishi Sunak, who announced that he would submit the budget, as planned on March 11. Recall that the markets expect him to expand government spending and investment. Overall, pound purchases remain one of our favorite trading ideas. But when buying a pound, do not forget about the key risk for it - news from the fronts of trade negotiations between the EU and the UK. Today, in terms of macroeconomic statistics, it will be interesting for inflation data for a number of countries, including the UK, the USA and Canada. Markets are now extremely vulnerable to inflation statistics, as rising inflation will be a signal for central banks to curtail ultra-soft policies.
Long
by Trade24Fx
Recession in Japan, China's stimulus and UK’s dataPerhaps the main event and surprise of yesterday were the devastating data on Japan's GDP for the fourth quarter. The country's GDP fell by 1.6% (the forecast was a decline of 0.9%) in terms of q/q and 6.3% in relation to the same quarter last year (the worst result since 2014). This is a very alarming signal for the global economy because Japan is the third-largest economy in the world. And although the reasons for such a failure are generally justified - a destructive typhoon and tax increases, the picture does not become less depressing. Given that China is Japan's largest trading partner, there is every reason to expect weak data in the first quarter of 2020 (consequences of the coronavirus epidemic). Do not forget about the loss of the tourism sector in Japan from China's ban on the travel of citizens. We are talking about hundreds of thousands of tourists from China who were supposed to visit Japan but did not visit with all the ensuing economic consequences. The second consecutive quarter of GDP decline is already officially a recession. That is, what we have been talking about for quite some time in our reviews is beginning to take on an increasingly clear line. What is characteristic, the Japanese yen against the background of such crushing statistics were not exposed to sales. Obviously, the demand for a safe haven asset in her person outweighs the desire to sell the yen to work out weak data. In this light, our desire to buy gold only intensified. Purchases of the Japanese yen, despite such weak data, also look good from current points. China, meanwhile, maybe trying to generate optimism after several weeks of continuous negativity. And this is not only about the statistics on the epidemic, which is beginning to decline but also about the position of the Chinese authorities, who yesterday promised to strengthen the stimulation of the economy in order to compensate for the negative consequences of the coronavirus. It is planned to reduce corporate taxes and increase government spending. Despite this positive, we believe that the damage has already been done and the world economy will still feel it in the first quarter. And the epidemic itself is still ongoing. According to experts, the Chinese economy will return to less or less normal functioning no earlier than in a month. In this regard, we recall our recommendation to sell oil. Demand for oil from China continues to fall, and refinery loading drops at a gigantic pace (at some plants, the decline was 10-20%). According to Citi analysts, the total volume of oil refining in China fell by 2 million barrels per day, while oil demand in China in February may show a decrease of 3.5 million BPD. These are very serious figures for the oil market. So we use any attempts to grow the asset as an occasion for its sales. For the British pound today is a pretty important day in terms of macroeconomic statistics - a block of data on the UK labor market will be published. In the past couple of days, the pound has somewhat lost its fuse, which was received in the form of promises to increase government spending. Today's data can either increase pressure on the pound, or give it the opportunity to return to growth. So we follow the numbers and adjust the positions depending on the nature of the data.
Short
by Trade24Fx
Week Results: China, the euro and oil problemsThe past week has already habitually passed in the analysis of news around the coronavirus. The main result was the restoration of economic activity in China, which greatly reassured investors, and they returned to the usual occupation in recent years - the purchase of risky assets. As a result, US stocks updated historic highs. At the same time, one cannot but note the opposite trends - gold was in stable demand, but oil was under pressure. This already indicates that investors are seriously worried about the consequences of the epidemic, which are primarily manifested in a sharp decrease in demand for energy assets (the International Energy Agency even predicted the first quarterly decline in oil market demand in 10 years). Investor fears are much easier to understand than optimism in stock markets. Fears are something rational: it is not clear what real economic damage China and the world as a whole will be caused by the epidemic. Do not forget that the root of the problem may lie not even in the fact of a slowdown in economic activity, but in the ability of China to service its debts, which have already reached 300% of GDP. And the epidemic is still only growing: the number of deaths has approached 1700, and the number of infected has exceeded 50,000 (according to WHO). But optimism is something from the field of irrational and emotional. Since we believe that, in the long run, proponents of a reasonable assessment of the markets will be right, we, therefore, continue to recommend sales on stock markets as well as purchases of safe-haven assets. Speaking of sales in the US stock market. The Federal Reserve Bank of New York announced that they will reduce the volume of interventions in the repo market. That is, cash injections will decrease. Which is very likely to provoke a decrease in demand in the stock market. In addition, this week we will look for opportunities for sales in the oil market. At least, if there is no news that Russia has decided to support Saudi Arabia and agrees to increase the volume of reduction in oil production. Well, or the epidemic will rapidly decline. In addition, this week we will continue to look for points of sale for the euro. The single European currency after a series of weak economic data, including a failure in industrial production, and close to zero GDP growth Euro zone looks extremely vulnerable. As for macroeconomic statistics this week, on the whole we are waiting for a relatively calm period. So, the markets will continue to follow the news from China and work out them first of all.
Short
by Trade24Fx
China comes back to life, experts calculate lossesChina yesterday began to actively restore economic and industrial activity in the country. Judging by official figures, the epidemic has begun to decline, so there is reason to believe that the worst is over. In this light, yesterday's growth in demand for risky assets is generally explainable. Perhaps the global economy in general, and China in particular, will get off easily. At least Bloomberg analysts believe that the impact of the epidemic on the economy will be extremely short-term. Although they note, in the first quarter of China's GDP growth will slow down to 4.5%. In general, the uncertainty with economic damage is likely to be a factor restraining another bout of unbridled optimism in the financial markets. The fact is that its scope can be more serious and tangible. For example, Simon McAdam from Capital Economics believes that the coronavirus will cost the world economy $ 280 billion and ultimately lead to the fact that the world economy in the first quarter of 2020 will not grow for the first time since 2009. JPMorgan analysts expect China’s GDP to grow by only 1% y/y in the first quarter (they predicted an increase of 6% y/y before the epidemic). Goldman Sachs expects the coronavirus to subtract 2% from the global GDP. And Morgan Stanley recently proposed how to measure the real extent of the downtime of the Chinese economy - by analyzing the level of air pollution. According to their calculations, air pollution in Guangzhou, Shanghai, and Chengdu is only 20-50% of historical values. This may mean that human activity here (transportation and industrial production) is only 50-80% of the usual. In general, the optimists or pessimists will determine the dynamics of prices in financial markets on who ultimately turns out to be right. Uncertainty just hangs in the air, which means that for now, it is better to trade inside the day with small stops. We will look for points to buy gold and the Japanese yen intraday. We will sell oil at the time of its growth. Also, we will buy the British pound. Yesterday's data on GDP (+ 1.1% y/y against the forecast of 0.8% y/y) and industrial production (+ 0.1% against the forecast + 0.3%) did not give rise to sales and important support 1,29. So, a rebound up is quite likely.
FOREXCOM:XAUUSDLong
by Trade24Fx
4
Oil and world are in danger, a pound in anticipationTraditionally, we start the review with news about the coronavirus epidemic. Once again, we note that the matter is even on its scale - thousands of times more people die from ordinary flu, and hundreds of thousands of times more get sick each year. The point is the problems that this epidemic has on the global economy. A number of key industrial centers in China have been completely or partially idle for the third week. Each such day is further destruction of the global supply chain, and if there are still enough stocks in warehouses, then every day the risk of a shortage of materials to continue the activities of companies becomes higher, as well as the scale of losses. One of the main victims this week maybe oil. We wrote that last week OPEC+ was able to tentatively agree to reduce oil production by another 600K b/d. But yesterday information appeared that Russia could refuse this. And here, even in Libya, the warring parties are close to signing a peace treaty, which is fraught with the return of several hundred thousand barrels per day to the oil market. And all this is happening against the backdrop of a sharp drop in oil demand from China. Not surprisingly, some experts predict an oil drop of at least 10% in the foreseeable future. In general, oil sales this week remain our basic trading idea. Returning to the current figures on the scale of the epidemic, we note that the number of deaths is approaching 1,000, and the number of cases is close to 50,000. Once again, we recall that these are official statistics. The main mass of experts converges in opinion, that the figures are underestimated by several times to several tens of times. In connection with such a development of events, we cannot but recall our recommendation to sell the Russian ruble. The conditions for this are almost ideal, especially when you consider that the Central Bank of the Russian Federation lowered the rate again last week and plans to do this further in 2020. Today, in terms of macroeconomic statistics, it will be interesting primarily for the British pound. Data on GDP and industrial production can trigger a surge in volatility in pound pairs. Given that in recent days, the pound was already under strong downward pressure, weak data will almost certainly trigger a new wave of sales. But at the same time, good numbers can give a start for strengthening the pound - points for its purchases are very attractive. In general, today you can try news trading, with pending orders or enter after the news, playing back a fundamental positive or negative.
Long
by Trade24Fx
Week Results: Virus, NFP, Pound & Investor ConcernsA week in the financial markets was held in the chronicles of the coronavirus. The epidemic is still under development. The number of deaths exceeded 700, and the number of deaths approached 40,000. A number of quarantined cities in China, many plants are idle, are already starting to disrupt the functioning of the global economy: some companies outside of China cannot continue the production process, since components from China do not arrive, some ( like Toyota and Honda) temporarily shut down their Chinese capacities and sharply lose in production volumes, some (like Apple) close their stores in China. And if on Monday and Tuesday last week, the markets still tried to pretend that they did not notice this, then towards the end of the week even excellent NFP figures could not inspire American investors to buy on the stock market. And although the VIX Fear Index fell by 15% over the week, there is a feeling that the time of unbridled euphoria in financial markets is coming to an end. And this means that now is the time to start opening short against risky assets. Moreover, the markets marked the highs, respectively, the points for placing stops are obvious, and the stops themselves are small especially with respect to the goals that can and should be set. The week as a whole turned out to be very successful for the dollar and ended on a major note: NFP figures came out well above market expectations (+225K with a forecast of +165K). In principle, employment data from ADP (+291K) were prepared by the markets for good numbers, but until the very last it was difficult to believe in them. The overall view was somewhat spoiled by weaker than expected growth rates of hourly wages, as well as unemployment, which went above forecasts. The main losers in the foreign exchange market were the euro and the pound. Traditionally, the reason for the sale of the euro was the weak macroeconomic statistics from the Eurozone. So German industrial production in December literally collapsed by 3.5% during a month, recalling that the recession is not just an economic term, but also one of the aspects of reality. As for the pound, the pressure on it was due to growing fears that the UK and the EU would not be able to agree on a trade agreement until the end of 2020. Our trading plan for this week is next. We continue to look for points for purchases of gold and the Japanese yen anyway (unless an ultra-effective vaccine is found and the epidemic of coronavirus is quickly over). We will wait until the euphoria around the dollar subsides, and we will look for points for its sales. The pound is not bad, the Canadian dollar looks interesting. We won’t touch the euro - the single European currency seems too toxic in the light of the latest data from Germany. While oil is below 51.20 (WTI benchmark) - we sell it with stop-flips above 52. In general, the situation with oil looks rather uncertain. OPEC +’s decision to expand the decline in oil production by 600K bd is, under normal conditions, the strongest bullish signal.
Short
by Trade24Fx
NFP Day, Coronavirus Chronicles, Pound WeaknessThe main event of today will be the publication of official statistics on the US labor market. On average, experts expect a gain of 162K. This is more than it was in the previous month, but less than the average value for the last couple of years. In general, it is worth noting that the trend towards a decrease in the number of newly created jobs with each new publication of data is becoming increasingly apparent. After the peak values of 2014 (then about 3 million new jobs were created during the year), the indicator was constantly decreasing, with the exception of 2018, when Trump's tax reform affected, but already in 2019, the effect had exhausted itself. So the US labor market in 2020 looks rather vulnerable. Especially in light of the coronavirus epidemic, which continues to gain momentum: the number of deaths is close to 600, and the number of deaths is close to 30,000. Quarantine continues, and more and more countries completely or partially interrupt a transport connection with China. In this light, data on the US labor market may well be unpleasantly surprising. The only thing that holds us back from frankly negative forecasts is the excellent employment figures from ADP (+ 291K). Although they can play a trick on the dollar because against the background of such numbers, almost any statistics on the NFP will seem weak. In total, we will not be surprised at the weak NFP figures, but we would not dare to put on this forecast. Instead, we offer traditional news trading in a pair of USDCAD. Recall that in parallel with the data from the United States will be published statistics on the labor market of Canada. That is, the USDCAD pair has a chance of a double impulse with no obvious direction. So a minute before the publication of data, we place pending orders such as stop orders for purchases and sales at 20-25 points from the current price at that time. And just waiting for the data. If there is a situation with data overlay (positive for the Canadian dollar and negative for the American or vice versa), then we remain in position until the end of the day. To other news and events of yesterday. In the foreign exchange market, the pound was under pressure amid growing investor concern over the outcome of trade negotiations between the UK and the EU. We believe that the parties will agree. In the end, the United States and China were able to enter the first phase, let alone Britain and the EU. So pound purchases remain one of our favorite forex positions. For other assets and markets, buying gold and the Japanese yen is still a priority. But with oil we, perhaps, will wait a while. The asset can not decide who it is - buyers and sellers - so we'll wait for more clarity. Moreover, Saudi Arabia and Russia have been agreeing on something for three days. The outcome of the negotiations could potentially blow up the oil market.
Long
by Trade24Fx
2