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The impasse of monetary policy and the future crisis We have repeatedly noted in our reviews that the historical highs of the US stock market is direct merit of the ultra-soft monetary policy of the Fed. The Central Bank poured money into the US financial market, however, everything that it could achieve was the formation of a record-high bubble in the stock market. So we emphasize the scale of what is happening. The total assets of the three major central banks of the world (Fed, ECB and Bank of Japan) in 2019 reached $ 14.5 trillion, which is 3.5 (!) much more than before the crisis in 2007-2009 (that time assets amounted $ 4 trillion). The fact of growth by 3.5 times is already alarming. In theory, $ 10 trillion should have been aimed at ensuring the growth of the economies of the USA, EU and Japan. But here we have a very serious discrepancy: the GDP of these countries over the same period grew by $ 5.3 trillion. That is, $ 4.7 trillion did not go to the real sector. The question is, where did the $ 4.7 trillion go? The answer is generally obvious - they went to the formation of price bubbles in different markets, mainly in the stock market and corporate debt market. Any attempt to increase the injection of money will lead to further inflation of price bubbles. But what is the Fed doing? Instead of gradually reducing its balance sheet and pumping out "excess" money from the financial markets, in the fall of 2019 the Fed sharply increased its balance and plan to start 2020 with a huge injection of money. At the same time, the ECB continues quantitative easing policy (the Bank of Japan is doing the same). That is, they persistently continue to do what does not work. Obviously, this cannot go on forever. They will have to abandon the flawed plan. This will lead to a sharp drop in demand in the stock market (extra money will go away) and, as a result, a sharp drop in prices. Another important point characterizing the inefficiency of current monetary policies is the extremely deplorable state of the global economy. The forecast for its growth rate in 2019 is 3%. This is much lower than the 40-year average and quite close to the border of 2.5%, which is traditionally associated with the recession phase in the global economy. At the same time, the US economy forecasts growth for 2020 in the region of 2%, the Eurozone and Japan - less than 1%. And this very clearly shows that the tactic of pouring money into the economy does not work. So the prerequisites for a full-fledged crisis have formed: bubbles in the financial markets, an extremely weak real economy and an ineffective monetary policy, which also has completely exhausted its anti-crisis and stimulating potential. Let us multiply by growing populism, protectionism and a general crisis in the political system of almost any country and we have an extremely explosive mixture. That is, any serious shock and a house of cards will sprinkle. Recall, we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:NDXShort
by Trade24Fx
4
Expectations for 2020 Caution is required from the thin market perspective also we expect an increased likelihood of volatility explosions on the market. As we turn to 2020, the year promises to be extremely difficult and eventful. Whether this year will be a year of crisis, we will see, actually we would bet on a crisis. In this regard, we expect massive sales on world stock markets, which will be accompanied by an increase in demand for safe-haven assets. So purchases of gold and the Japanese yen in 2020 will continue to remain relevant. "Deal of the Year" for us will be sales in the US stock market. But on this occasion, we have another review, where we describe in as much detail as possible why 2020 should be the year of the collapse of the US stock market (well, or at least, the time for a full correction on it). As for the foreign exchange market, a lot of trades will depend on the actual development of events: what the Fed will want?, whether a full-fledged crisis or recession will occur in the world?, how the elections in the USA will end?, etc. Therefore, for now, we will not make any guesses, but we will note one deal that has, in our opinion, the maximum chances to get profit. It's about buying the British pound. 2020 should be the year when Brexit “ends”. And according to the “soft” scenario. Accordingly, the growth potential of the pound is measured in hundreds of points, and according to our estimates, pared with the dollar, it may well exceed 1.40. That is, from current prices it is about 1000 pips. Another promising trade in the foreign exchange market, the sale of the Russian ruble. Its current strengthening of the ruble should not be intimidating or perplexing. On the contrary, this is just a great opportunity for sales. Yes, probably you will need to hold the position for more than one week or even a month. But we have practically no doubts about its positive outcome. And a few words about oil. Its growth potential due to the new OPEC + deal is not fully exhausted. But in general, we tend to begin to build a medium-term short position, starting the first round of sales already at current prices. Why? the expectation of serious problems in the global economy. Recession or toward recession will be a serious blow to demand in the oil market, which will invariably provoke a drop in quotations. Also, on the supply side, 2020 could be a watershed. Russia is talking about a possible exit from OPEC + due to the need to fight for market share. If this happens, then sales on the oil market can not be avoided. Therefore, those who are ready to be in a position for several months can join us and start selling oil.
Long
by Trade24Fx
Thin market and statistical arbitrage in safe-haven assetsThe period of the Christmas holidays is traditionally characterized by low liquidity in the financial markets (so-called “thin market”). So you can increase the level of aggressiveness in trading to the maximum due to the relatively insignificant volatility. But at the same time, the probability of flash crashes and sharp inexplicable jumps in volatility during such periods is maximum. We have not noticed any flash crashes on this Christmas, however, strange movements were present. Dynamics of safe-haven assets during Christmas week, for example. Gold has been growing steadily that day and consolidated above 1510. At the same time, the Japanese yen is under pressure and buyers tried to break through the resistance level at 109.60. Well, yen rate dynamics could be explained by Trump’s announcement that an official ceremony of signing an interim trade agreement between the United States and China will be held soon. But the growth of gold, in this case, is illogical. Who is right in the end: gold or the yen - we will see. And we have a trading idea about this. This is the so-called statistical arbitrage. The correlation level between gold and the Japanese yen in 2019 was quite high. That is, statistically, they should change synchronously. Now there is a desynchronization (divergence). It can be eliminated either if gold drops sharply, and the yen remains unchanged, or the yen rises sharply with gold remains at the same level. Both of these options guarantee earnings if you simultaneously sell gold and buy the Japanese yen. And finally, another excellent trading opportunity - sale of the Russian ruble. For those who are already in the pair's purchases, we would recommend adding twice the volume.
Long
by Trade24Fx
Christmas Trading, Fed & Aussie BreakthroughThe pound had dropped below 1.30 earlier in the week. AUDUSD gained a foothold above the resistance level of 0.6900. If this breakdown turns out to be stable, then a wide space opens up for the AUDUSD for further growth to at least 0.7020 or even 0.7200. Since AUDUSD is above 0.6900, its purchases seem to us profitable. But in any case, remember the Australian dollar refers to commodity currencies, which means it is extremely sensitive to news from the fields of trade wars. Further de-escalation of the conflict will contribute to the implementation of the scenario described above. But the slightest fears about the negotiations between the USA and China can negate yesterday’s breakdown. In addition to the Australian dollar, what is happening on the foreign exchange market is worth noting except the inability of the pound to go below 1.2920, which can be taken as a signal that a panic wave has subsided. In this case, upon the return of the GBPUSD above 1.30, we recommend its purchases. Today we’ll talk about the monetary policy of the Fed and a rake the Fed stepped on. The Trump invades not only the politics and economy of the United States but also intervenes in the activities of an independent body, the Central Bank. Yes, the direct threats and calls of Trump are ignored by the Fed, but there are indirect points (for example, the consequences of trade wars) that the Central Bank cannot ignore. So the Fed’s attempt to normalize monetary policy and smoothly blow out the price bubbles that have formed in the stock market, corporate lending market and the debt market, faced with the consequences of the trade wars unleashed by Trump. And in 2019, instead of the planned increase in the rate by 0.50% -0.75%, the Fed cuts the rate three times. Thus, provoking further inflation of bubbles. So, the consequences will be more disastrous. The World Bank predicts China the role of the epicentre of a new global crisis. So we may well face a new Asian crisis, but unlike 1998, the matter will not be limited to a slight fright and default of a single Russia.
by Trade24Fx
2
Pressure on pound intensifies & apocalypseDespite the Christmas holidays and general calm in the forex market, the pound is dropping. Going below 1.30 is a very bad sign, but given the importance of the level zone 1.2950-1.3000, there is a serious risk of a full-fledged downward to 1.20. If the markets continue to believe in the impossibility of signing a trade agreement between the EU and the UK until the end of 2020, then exactly 1.20 is the mark to which the pound will be lead. Our position on the pound is unchanged: a critical reason for a “soft” Brexit is available and it will be extremely illogical to cross out the results of the efforts of the last three years at the last moment. So, in the medium-term purchase, buying pounds with each 100-point drop makes it more attractive, as the risk level is decreasing and the profit potential is growing. As for intraday trading, while the pound is below 1.30, bears control the situation. Accordingly, there is no desire to go against the market. Therefore, while the pound is below 1.30, we will trade on the intraday basis in both directions. Note that in the “thin” market, taking important levels is often false, so you should be prepared for a turn at any time. Now most pairs have quite interesting entry points. EURUSD, for example, a purchase from support 1.1070-80 with stops below 1.1040 and profits in the region of 1.1150 seems to be a very balanced trade (30-80 risk points account for 70-80 points of potential profit). USDJPY: all bull attempts to gain above 109.50-60 failed 2 times in a row. And if so, then it seems logical to decline to 108.50 region. That makes it possible to open a profitable position. Sale from 109.50 with stops above 109.80-90 and profits of about 108.50-60. The ratio of profit to risk is almost 3 to 1. Let’s back to the information background. World Bank experts frighten of the scale of the new crisis (debt crisis): the debt burden is growing rapidly, both in the private and public sectors, and this is happening not in individual regions, but around the world at the same time. The undisputed leader is China so that it can become the epicentre of global problems. We have been waiting for a crisis for a long time and every day its probability, in our opinion, is becoming higher. So buying safe-haven assets continues to be one of our favourite trading ideas.
Short
by Trade24Fx
Worst week. Christmas. What to expect?The pound experienced one of the worst week these years. Johnson and the deadlines greatly spoiled the mood for buyers of the British currency. The ghost of an exit without a deal materialized again. However, its probability is no more than 25% (according to Goldman Sachs analysts), many hastened to take profits from the sharp growth of the pound in the parliamentary elections after net sellers joined them. Also, weak data from the UK was published, as well as a “dovish” tone of comments from the Bank of England. As a result, all this led to the 1.30 test. No matter how bad was the last week, we see no reasons to panic. On the contrary, the pound is perfectly substituted and this should be used. Johnson's words in no way (in our understanding) cancel the general line, which is the "soft" exit of Great Britain from the EU. On Friday, the new Parliament of Great Britain has already voted for the version of the agreement developed by Johnson. That is, from the point of view of facts, everything speaks in favour of an exit from the transaction. Exit with the deal is the price of the pound against the dollar 1.40 and higher. Besides, Friday's UK GDP data came out better than expected. So feel free to buy the pound in the medium term and on the intraday basis. Highlights and takeaways from the historic week that Trump was impeached. We do believe that Trump will “sit in his chair” until the end of his term, but the future fate of the presidency is a question. In general, the Democrats held an excellent rally of black PR. Their coming to power can greatly change not only political but also the economic reality in the United States. But this perspective is still quite far. We are waiting for Christmas week. Accordingly, an extremely thin market with an increased risk of volatility explosions or even flash crashes. Our trading plan for this week is extremely aggressive intraday trading based on oscillator signals. We do not expect any strong directional movements and look forward to fluctuations in relatively narrow ranges. Making trading almost risk-free. In our case (thin market), we ensure each position with relatively small stops. As for the medium-term positions: we buy the pound, the Japanese yen and gold, we sell the Russian ruble.
Long
by Trade24Fx
Pound under pressure, GDP & dollar There was a lot of talks about Trump Impeachment. Despite the decision of the House of Representatives, the chances of gaining Senate support are extremely low (gaining 2/3 of the vote is almost impossible). So the reluctance of the dollar to fall against this formally negative fundamental background is generally understandable. And if the dollar yesterday felt relatively confident in the foreign exchange market, the British pound continued to be under pressure. The day for the GBP began with failure: retail sales (MoM) November f -0.6%, however, the experts expected an increase + 0.2% (MoM). As a result, this decline formed the longest series of monthly retail sales in the country since 1996. A series of the fundamental negative for the pound continued the Bank of England. The central bank did not lower the rate but made it clear that considering such an option. Lowering the forecast by the Central Bank on UK GDP growth rates in 2020 by 0.1%is not optimism news for pound buyers. So the results of the meeting of the Bank of England are “dovish”, which was against the British currency. The fate is not in the hands of the Bank of England or macroeconomic indicators but in the hands of Brexit. Despite Johnson’s statements on Monday, we continue to believe in the deal and the “soft” Brexit, which means that the pound will certainly grow, with growth rates up to 1000 pips. Accordingly, the lower the pound falls, the greater the growth. Therefore, we continue medium-term purchases of the pound, and today we buy on intraday from 1.30 (the entry point is too good to pass by, plus the Friday before the Christmas holidays - many want to take profits in short pound positions, which will contribute to its growth) Today is unlikely to be calm. Besides the fact that it is necessary to process and take into account the prices the entire array of information that is hitting the financial markets this week, on Friday we are waiting for data on the GDP of the UK and the USA to come out, as well as statistics on retail sales in Canada. We do not expect any excessively strong directional movements, so we will adhere to the tactics of oscillatory trading on the intraday basis As for medium-term positions, there are no changes: we buy the pound, the Japanese yen and gold, we sell the Russian ruble.
Long
by Trade24Fx
Trump Impeachment, infernal sanctions, BoE & BoJUS President Donald Trump has been impeached by the Democratic-led House of Representatives for obstruction of Congress and abuse of power related to his dealings with Ukraine. The votes made Trump only the third president in United States history to be impeached and set the stage for a likely trial in the Republican-led Senate in January. This event has already been included in current prices and moods in the financial markets. Note, the fate of Trump is in the hands of the Senate, and there are 2/3 of the Republicans, so, Trump is not in danger. Nevertheless, we cannot but note that our already strong desire to sell the dollar after such news only intensified. After a volatile market on Tuesday, Wednesday became a respite day. But today there is a possibility of the return of strong movements in pound pairs in the foreign exchange market. It is about the announcement of the results of the Bank of England. Experts expect the parameters of monetary policy in the country to remain unchanged. In general, this will be in line with the current mood of the leading Central banks in the world, which have taken a break and are following the development of events. So, surprises should be expected only from Mark Carney’s comments. Our expectations and a trading plan for today. As the pound sales dwindled yesterday. The markets have calmed down. So you can not be afraid of a crazy panic wave, which will be able to absorb our position beneath. Therefore, today we are returning to the idea of buying a pound both on the intraday and in the medium-term positions. The EU and Johnson’s comments could provoke local outbursts of volatility, and the direction of the price dynamics of the pound will be determined by the nature of information injections. But if you sit and wait for this kind of information, then you can freeze trading activity at all. So do not be afraid of opening the trade - the only restriction taking into account current realities is setting up the stops for each of the trade. Recall that we believe that the pound’s real value is 500, or even 1000 pips more expensive, which means buying is a promising trading idea. Among other trading ideas, we note simply excellent points for the sale of the Russian ruble. The fact is that yesterday the relevant committee of the US Senate approved sanctions against Russia for interfering in the elections. We are talking about the so-called "hellish sanctions." Of course, the bill still needs to be voted on and given to Trump for signature, so it is still a long way from implementation. The fact that the process is in progress cannot but put pressure on the ruble. That is why its current price is a gift that is simply a sin to refuse from. But in order to make this position more balanced, we recommend using oil purchases as a hedge. Actually, the ruble is growing because of oil growth. Even after the announcement of the OPEC + decision to increase production cuts, we recommend buying oil. So far, the dynamics of the asset fully justify this recommendation, which testifies in favour of our correct understanding of the situation. The Bank of Japan has already announced its decision. The expected monetary policy parameters remained unchanged. Therefore we purchase the Japanese yen. Low volatility, coupled with the USDJPY near to the top of the medium-term range, makes the deal quite profitable on the other hand with very limited risks. That is, sales of the USDJPY from 109.60 with stops above 109.90 and minimum profits of about 108.50 (or even 107.30) make the deal extremely interesting.
by Trade24Fx
Johnson's threats and pound fail: earning moneyYesterday Boris Johnson turned British politics upside down. By the way, labour market data came out mixed. On the one hand, claims for unemployment benefits increased (+ 28,800 versus + 26,400 in October), and on the other hand, employment rate was higher than expected (24,000 with a forecast -14,000), and unemployment rate turned out to be better than experts expected (3.8% with a forecast of 3.9%). Johnson stated the need for the legislative establishment of the deadline for the transition period, which is intended to coordinate and adopt a new EU trade agreement. We are talking about the end of 2020. The fact is that the development of a similar treaty between the EU and Canada took 7 years. And Johnson offers to do it in a year. Since this is practically unrealistic, as the EU representatives have already stated, the markets took Johnson’s position as a signal that exit without a deal ( so-called “hard” Brexit) is again becoming a real alternative. As a result, the pound dropped below 1.31. Since our position on the pound was extremely clear - to buy, it is necessary to explain what to do now in the light of such information. Well, to start with, our position has not changed, and a decline in the pound is an opportunity for cheaper purchases. It is necessary to clearly distinguish Johnson’s words from Johnson’s actions, that is, what he is saying and what he is doing. Recall, we prefer to work with facts. So, the truth is there is an already developed agreement Johnson has also the parliament is under his control, that is, everything for a successful Brexit. As for the inconsistency of his words and actions, then keep in mind his rhetoric in September-October: no delays after October 31. But, the agreement with the EU and the postponement of Brexit until January 31, 2020. So we will continue to buy the pound and consider yesterday's decline as a gift from Johnson. The only thing to keep in mind is that locally the decline may continue today until the 1.30 mark. Given the rate of decline, the chances of reaching this base level for the pound are quite large. As for our other positions, they are unchanged: we are looking for points for selling the dollar, the Russian ruble, we are buying yen and gold.
Long
by Trade24Fx
Europe is “disappointing”, we trade with oscillatorsMonday turned out to be a relatively calm day for the foreign exchange market. The euro and the pound could not reach Friday's peaks, due to the weak macroeconomic statistics. For example, in Germany, the PMI in the manufacturing sector fell to its lowest level in the last couple of months and amounted to 43.4. This confirms that the largest eurozone economy is experiencing serious problems. Recall, any index value below 50 means that activity in the manufacturing sector is declining. Germany is not an exception. Weak data came from both France and the UK. According to PMI, manufacturing activity in Britain is at its lowest level over the last 7 years. The PMI in the manufacturing sector in the UK came out at 47.4 pips (analysts expected 49.2). In general, the lack of growth of the euro and the pound against the background of such data is quite logical. On the other hand, this is not a reason to refuse to buy EURUSD and GBPUSD. All we need is statistics on industrial production in the United States come out weak. Well, for the pound it would be nice if the data on the labour market did not disappoint. In general, today we are not expecting any revelations and strong directional movements. In our opinion, the best trading tactics for today is oscillatory trading. So we trade with RSI or Stochastic or you can choose another one. Once again, we draw attention on extremely attractive positions for sales of the Russian ruble.
Long
by Trade24Fx
Last week results & immediate plansThe markets finally went out of “hibernation” so we could observe fluctuation not by 40-50 pips, but by 100+ (well, or 400, as is the case with the pound on Friday). Last week began with Trump's tweet about the successful completion of the first phase of negotiations with China. Recall, on December 15, the United States threatened to introduce additional tariffs on goods from China in the amount of $ 160 billion, which kept the markets in suspense. According to Fox Business, Washington and Beijing completed the "first phase" of the trade transaction, but its terms may not be publicized at all. Formally, this is an occasion for optimism and the start of sales in safe-haven assets. Nevertheless, we consider the current equilibrium to be extremely fragile and continue to look for points to buy yen and gold on the intraday basis. Then there was a meeting of the Fed, which showed that the US Central Bank is serious about holding a pause in monetary policy - everything suits US Central Bank in the current state of affairs in the economy. But at the same time, the Fed will continue to flood financial markets with money through the Repo system. The Fed’s balance sheet reduction was replaced by a sharp expansion: according to the Fed, it plans to infuse $ 500 billion. If this happens, then by mid-January the Fed’s balance will increase its balance by 10% in just a month. As a result, the balance will exceed $ 4.5 trillion and reach new record levels. Honestly speaking, instead of gradually removing this money from the system, the Fed continues to increase its amount. In the end, it will end badly. For the dollar, this, in our opinion, is a kind of sentence. Classic demand-supply chart: with a sharp increase in supply, the price should decline. So this week and for the foreseeable future, we will sell the dollar across the entire spectrum of the foreign exchange market. The first ECB meeting chaired by Christine Lagarde ended with nothing - the monetary policy parameters did not change. But the new head of the ECB made it clear that it was time for the Central Bank to change its strategy of action and promised to present its vision by the beginning of 2020. The main event of the week was the victory of the conservatives in the parliamentary elections in the UK. Many have already called this a kind of second Brexit referendum since voting for Johnson is a vote for his plan to leave the EU by January 31st. The pound on this occasion rose sharply on Friday, reaching 1.35. After that, we perceive some correction as an excellent chance for its cheaper purchases. Indeed, by and large 1.35 - this is not the limit of growth and the pound could well grow to the area of 1.40 and even higher. As for the interesting perspective positions USDRUB purchasing (this will become a kind of hedge for other positions on the sale of the dollar against the euro, pound, Japanese yen and other base currencies). In general, the week ahead is quite eventful: the announcement of the results of the Banks of England and Japan, GDP of the USA and Great Britain and so on. This means that it makes sense to start trading after a rather long period of hibernation in the foreign exchange market.
Long
by Trade24Fx
Britain Election Results, Lagarde Position and Trump TweetsElections in the UK, ECB decision and potential approach the finish line in the first phase of negotiations between the US and China. We will take these matters up one by one. In Britain, parliamentary elections were held. The conservatives, led by current Prime Minister Boris Johnson, confidently won. This victory quite radically changes the political alignment in Britain, but for us, it is interesting primarily for Brexit. In this case, our basic version worked out perfectly: the “soft” Brexit option will be implemented based on the current version of the agreement between the EU and the UK. Naturally, the pound pulled up amid such results. Recall that in our reviews this week we actively recommended buying it. So congratulations to those of our readers who listen to our recommendations, with excellent results. The ECB yesterday expectedly left monetary policy parameters unchanged. And the volume of the asset buyback program (quantitative easing) remained at the level of 20 billion euros. The new head of the Central Bank Christine Lagarde said that the slowdown in the Eurozone economy has stopped. She could have been trusted, if not for yesterday’s data on industrial production in the Eurozone, which showed a decrease of 0.5%. As for the other her statements, it is worth noting the intention to revise the ECB's monetary policy strategy, but some details will become clear not earlier than from the beginning of the next year. But this did not contribute to the growth of the euro today. Brexit is a problem not only in the UK but also in the Eurozone. Accordingly, its resolution is positive for the euro too. Yesterday we could observe the sales in yen pairs and gold, that is, in safe-haven assets. This sale was based on Trump's tweet that the United States came close to a deal with China. Today we will buy safe-haven assets: first of all, sell EURJPY and USDJPY as a less risky option, but we will also look for points for buying gold. Recall, on December 15, the United States may increase duties on goods from China. China will naturally response. Thus, Trump's tweet creates the illusion that there will be no further escalation. If the illusion is dispelled, it will provoke a sharp increase in demand for safe-haven assets.
Long
by Trade24Fx
UK election results and ECB decisionConcluding a year that saw the central bank take down its benchmark rate three times, the Federal Open Market Committee on Wednesday met widely held expectations and kept the funds' rate at the same level. The Fed is completely satisfied with the current state of things. As a result, markets do not expect any changes in the monetary policy until the end of 2020. The dollar was sold out following the Fed’s decision and Powell’s comments. Our position on the dollar today is unchanged - we are looking for points for its sales. Another promising position for today is pound purchases. General election 2019 polling day today Today, December 12. Its results can change not only the political situation in the country but also affect Brexit. Moreover, its influence can be quite diverse and even opposite. Detailed analytics on this issue is given in yesterday’s review. Here, we note that, in our opinion, the balance of threats/opportunities and profits/risks is biased towards profits and opportunities. Christine Lagarde faces her first real test at ECB debut meeting. The era of Draghi is over, but what Lagarde will remember is still unclear. If she decides to express her vision and strategy, movements may well be in pairs with the euro. As for the parameters of monetary policy, today we do not expect any changes. So today it’s worthwhile to be more careful with the euro, on the one hand, be more careful, and on the other, the euro may well get out of hibernation, which will provide opportunities for earning. And finally, a few words about the oil market. IPO Saudi Aramco the initial public offering is expected to raise at least $25.6 billion, making it the largest ever with a capitalization of $ 1.88 trillion. The oil market more than calmly reacted to this news. Nevertheless, so far our position on oil remains unchanged - we will continue to search for opportunities for oil purchases on the intraday basis.
by Trade24Fx
Pound, and we are preparing for the Fed announcementOn December 15, the United States will not increase tariffs on Chinese goods.The reason is that the negotiation process between the US and China continues. The news was supposed to provoke sales in safe-haven assets, but it did not happen. That only confirmed our recommendation to look for points for buying gold and the Japanese yen on the intraday basis. Another quite revealing statement yesterday was the growth of the pound after frankly weak macroeconomic data came out: GDP, industrial production, and the trade balance were worse than expected and were generally weak (GDP growth at minimum levels since 2012). Nevertheless, the pound, as a result, did not decline but even strengthened. The reason is the same - markets expect a conservative party to succeed in the Thursday elections and the subsequent “soft” Brexit. We continue to recommend buying the pound. The key event on Wednesday will be the announcement of the decision of the Federal Open Market Committee on the parameters of monetary policy in the United States. After the publication of data on the labour market in the United States last Friday, it became clear that the Fed would not lower or raise the rate. Thus, the probability of maintaining the status quo is 98%. Therefore, do not count on strong movements in dollar pairs today. Accordingly, our trading tactics for the dollar today are unchanged - we will continue to look for opportunities to sell the dollar. As for the oil market, despite the data on the growth of oil reserves in the United States (figures from the API showed an increase of 1.41 million barrels, official statistics from the US Department of Energy will be published tonight), we continue to consider oil purchases in the current conditions quite pe promising trading idea.
Long
by Trade24Fx
Time "X" is getting closer, Boris may be celebrating his victoryIn yesterday’s review, we already noted that this week may be decisive for several financial assets, and the global economy as a whole. On December 15, the United States may introduce tariffs on goods from China and thus bring trade wars to a new level. It's entirely up to an agreement between the parties. Even though we have heard positive statements for more than a month, the situation looks more and more menacing day by day. Although the probability of the successful completion of the first phase of trade negotiations between the United States and China is quite high, we will continue to look for points to buy safe-haven assets today. This recommendation will remain relevant until the actual conclusion of the contract. Meanwhile, in the foreign exchange market, is getting ready for Johnson's victory in parliamentary elections in the UK. According to recent polls, the Conservative Party will be ahead of the Labor Party by at least 10%. Recall, for Brexit, this means the end of the story - Johnson will be able to present his version of the deal Britain will finally leave the EU with the deal. For the pound, this is a powerful fundamental positive background. In this regard, we continue to recommend the purchase of the pound. It may well grow in the foreseeable future by several hundred pips. Since we are talking about the pound, we note that today will be published statistics on the UK. So you need to act with an eye on the data on GDP, trade balance and industrial production. Speaking of our other trading ideas for today, they are unchanged. Oil purchases still seem like a great idea to us in light of the latest OPEC + decision. Dollar sales are also promising.
by Trade24Fx
1
Strange last week, the OPEC decision & near futureThe reasons for the markets getting out of “hibernation” are an active news background interspersed with the news. Recall, it was launched by Trump's decision to impose tariffs on steel from Argentina and Brazil and at the same time accuse these countries of currency manipulation. What was perceived by us as an expansion of the trade war and a possible beginning of the currency war. Well, the week ended with the publication of statistics on the US labour market, as well as the completion of the OPEC meeting. Let's start with statistics on the US labour market. Honestly, it surprised us. The numbers came out abnormally high for the current reality of the US economy (+ 266K with a forecast + 180K). Also, the unemployment rate fell to its record low marks (3.5%). The growth of the dollar against the backdrop of such excellent data was logical. But, given the anomalous nature of the given data, we would not be in a hurry to conclude. At least one more confirmation is needed that + 266K is not a coincidence, but a pattern. So on Monday, we will rely on local profit-taking in the dollar after Friday's growth, and therefore we will look for points for its sales. Note that on Friday our recommendation for news trading in the USDCAD worked out perfectly: excellent US data overlapped with bad figures on the Canadian labour market, as a result, the USDCAD soared by 100 points. Perhaps the most important event in terms of the consequences of the past week was OPEC’s decision to further reduce oil production from 1.2 million to 1.7 million from January 1, 2020. So, we can talk about the OPEC + agreement №3 (recall, the first one, provided for a reduction of 1.8 million barrels, the second one 1.2 million barrels per day). At the same time, Saudi Arabia made an unexpected statement of readiness on its part to further reduce production by another 400 thousand b / d. That is, the total reduction may reach 2.1 million barrels. This is the highest reduction since the cartel's attempts to stabilize the situation in the oil market. Despite the rather modest oil growth on Friday, such an outcome of the OPEC meeting is a very strong bullish signal. So this week, we will look for points for oil purchases. It would seem that after such a busy week the markets need a break, but you should not count on it. This week promises to be even more volatile. Key events are the announcement of the Fed decision on monetary policy parameters in the US, the ECB in the Eurozone, as well as elections in the UK. And although both events seem relatively predictable, there is enough time for surprises. How to make money on each of this news we will write a bit later. As for our positions, we do not see any reason to change our basic strategy (except oil). Therefore, we will continue to buy safe-haven assets (gold is simply perfectly substituted), sell the dollar, and this week we will actively build up a long position on the pound - the victory of conservatives in the UK parliamentary elections will have to hit the pound higher. we will buy oil.
Long
by Trade24Fx
1
Getting ready for the NFP, OPEC & trading on the newsIt is worth noting statistics from the Eurozone that was published on Thursday. On the one hand, as we predicted, Eurozone GDP came out better than expected (+ 0.2% q / q with a forecast + 0.1% q / q). On the other hand, retail sales failed (-0.6% m / m with a forecast -0.5% m / m), and industrial orders in Germany unexpectedly declined (-0.4% m / m with a forecast + 0.4% m / m). However, this did not prevent the euro from strengthening yesterday. Friday promises to be an exceptionally busy day for financial markets. First, official statistics on the US labour market will be published. Secondly, the results of an expanded OPEC meeting will be summarized. Also, we are waiting for data on the labour market of Canada. Let's start with an indicator that could potentially trigger volatility in the financial markets. We are talking about NFP. The forecasts, in our opinion, are too optimistic. Although + 180K jobs - almost the average figure of the indicator for 2019, current trends in the US economy show that + 180K is a bit overstated. The fact is that the non-farm payrolls: 180K+ is obliged to the start of the year when in January and February the indicator exceeded + 300K. But such figures have not been shown for a long time so without these two periods, the average in 2019 is less than 150K. 150K seems to us much closer to current realities, and in light of the weak employment rate from ADP published on Wednesday (+67 thousand jobs with a forecast +135 thousand), a figure below + 100K will not surprise us. So our recommendation for the dollar (in the light of our expectations from the NFP) is to sell the dollar. Note that the indicator's output between + 120K - + 180K may be completely ignored by the markets. Concerns about the demarche of Saudi Arabia at the OPEC meeting become irrelevant. On the contrary, there is increasing talk throughout the markets about a possible increase in the volume of reduction in oil production under OPEC + from the current 1.2 million bpd to 1.6 million bpd. However, even if such a decision is made in the oil market, nothing will change - OPEC countries are now extracting less than is stipulated by the agreements. Our position on oil is unchanged so far - oil growth is a great opportunity for asset sales. Today promises to be over-volatile for the USDCAD due to the simultaneous publication of labour market data from both the United States and Canada. Given the uncertainty related to the data, our recommendation for working with a pair today is to trade pending orders. Before the data is released, we place pending orders of the buy stop and sell stop type at 20-30 pips from the current price at that time. And then we just wait. That will almost certainly provoke the formation of a strong unidirectional movement, you can earn on.
FX:USOILShort
by Trade24Fx
OPEC meeting, Bank of Canada decision and Eurozone GDPWe start with macroeconomic statistics, it is worth noting the extremely weak employment rate from ADP: +67 thousand jobs with a forecast of +135 thousand. So, buyers of the dollar should at least focus, because if similar statistics come out on Friday on the NFP, the dollar may well be sold out. Statistics on business activity in the Eurozone came out surprisingly good, which intensified the talks that the European economy was beginning to recover. The pound also got its reason for growth, as the UK business activity index also exceeded forecasts. Although we note that it was still below 50. It is rather symptomatic that the pound continues to grow without waiting for the election results. The markets decided that Brexit’s fate is predetermined (there will be no way out without a deal), but the pound is still very cheap, you need to buy it before it’s too late. We have long been bulls as for pound, so nothing surprising happens to us. We only note that a daily close above 1.30 is a strong bullish signal. And the pound may grow more than one hundred pips. So we are looking for points for his purchases. The Bank of Canada did not change the rate yesterday but was quite optimistic in its comments, which contributed to the growth of the Canadian dollar. So those readers who were following our recommendations could put in their piggy bank a good profit. Despite the extremely frightening information at the beginning of the week, the negotiation process between the US and China continues. And according to its participants, by December 15, the first phase should be completed. As for today the macroeconomic statistics, the news of the day will be the publication of Eurozone GDP. The fact may likely be higher than forecasts. This means that the euro may well strengthen up to 1.1160 paired with the dollar. Well, the main event of the week, at least for the oil market, will be the beginning of the OPEC meeting in Vienna. The most likely scenario is an attempt to leave everything as it is. That is, they will adhere to the current line of behaviour (an agreement to reduce production by 1.2 million b / d). For oil, this decision, by and large, does not change anything in terms of fundamental alignment. But any agreements to increase the limits will play into the hands of buyers and vice versa. Refusal of the deal in any form will be a strong hit to oil and activates its sellers.
TVC:DXYShort
by Trade24Fx
Will currency wars replace commodity wars?In general, Monday began quite peacefully. China has been non-aggressive in its response to Trump who has signed into law a bill that supports pro-democracy protesters in Hong Kong. And it seemed that we were waiting for another boring day. However, Trump once again showed why we prefer the sale of the dollar for a quite long time. He began the day by accusing Argentina and Brazil of understating their national currencies value to gain a competitive advantage for their products in the US market. In response, the President of the United States raised tariffs on the import of steel and aluminium from these countries. Well, he continued with the Fed’s traditional accusations of overvaluation of the dollar and called on the Central Bank to weaken monetary policy and the dollar. Markets took it as signals for sales of the American currency. Moreover, the buyers on the dollar were not happy with the data on the ISM Index in the US manufacturing sector: 48.1 pips with a forecast of 49.2 pips. Recall that an index value below 50 signals a deterioration in business activity in the US manufacturing sector. Well, returning to Trump and his actions on Monday, in the light of such events, it’s premature to talk about the end of the trade wars. Rather, on the contrary, there is a reason to talk about the transition of trade wars to currency wars with the consequences that maybe even more devastating for the global economy. In general, the future looks rather bleak. In this regard, our recommendations to buy safe-haven assets remain relevant. Our basic positions for today are: finding points for sales of the dollar, purchases of gold and the Japanese yen, sales of oil and the Russian ruble. We also note that while the period of low volatility continues on the foreign exchange market, it is worthwhile to continue aggressive trading on the intraday basis without obvious preferences, for which you can use watch oscillators.
TVC:DXY
by Trade24Fx
Getting ready for a difficult week and analyzing key eventsThe previous week for the foreign exchange market was marked by record-low volatility. Even the blackest Friday of the year did not desire to buy or sell actively anything. The informational background of the week was relatively calm. Negotiations between the US and China were moving somewhere, according to the assurances of the parties. But the markets are tired of talks and waiting for actions. And then Trump signed an extremely irritating China law to support Hong Kong protesters. That hypothetically could disrupt the entire negotiation process. In general, so far everything is not that clear, which means potentially unstable. Accordingly, this week we are looking for opportunities for the purchase of safe-haven assets. The points for this are very prospective, in terms of profit/risk per trade. The upcoming week will be interesting. Statistics on the US labour market will be published on Friday, which is expected to lead to strong movements in dollar pairs. Also, OPEC will meet on Thursday, which in theory could provoke an explosion of volatility in the oil market. According to experts, Saudi Arabia may put the question point-blank of non-fulfilment by several members of their obligations under OPEC +. Actually, it is the efforts of the Saudis that keep afloat the conditions for reducing production by 1.2 million barrels. If Saudi Arabia decides that they are done, the oil will fall quickly and violently (see oil dynamics on Friday). In this light, let us recall our recommendation to sell oil as a basic idea for working with oil under current conditions. Another important news that worth noting is the announcement of the Bank of Canada decision on monetary policy parameters, data on Eurozone GDP and US business activity indices. So far, our position on the dollar is unchanged - we are looking for points for its sales. But a series of a confident macroeconomic positive outcome may make us change our position, at least in the short term position. So we will closely follow the news.
FOREXCOM:XAUUSDLong
by Trade24Fx
US records, Trump irritates Sino & Johnson is ready to celebrateMost Americans, as well as financial markets, received the day off from work on Thursday, therefore, we can focus on other financial markets. In today's review, we will focus on the oil market. Recall that next week the OPEC meeting should be held, which could potentially change the existing balance of forces in the oil market. But we will talk about this meeting later. Now let's focus on the current state of affairs. Oil growth last week was highly dependent on optimistic news about the progress in negotiations between the US and China. Accordingly, traders worked out a possible increase in demand in the oil market. But, as we already noted in the previous reviews, the markets are already tired of promises and waiting for results. Accordingly, oil growth stopped. The participants in the oil market can be understood, especially considering that Trump has nevertheless signed a law to support protesters in Hong Kong. Potentially, this could cause a new round of escalation in relations between the USA and China and another breakdown of the negotiation process between the countries. At the same time, statistics from the US come out bearish. First of all, it is about the USA reaching a new record in oil production: 12.9 million barrels per day. The result was an increase in US oil reserves, which in aggregate puts pressure on oil quotes and not only does not allow the asset to grow but also pulls it down. Our position in oil is as follows: we look for points for selling the asset on the intraday basis and sell oil in the medium term (current prices are quite favourable for this). But lets back to other news and markets. According to a YouGov poll, conservatives will win and get the vast majority in the December 12 elections in the UK. This means that Johnson will have every opportunity to ratify his Brexit deal. Thus, the probability of exit without a deal has become even more insignificant. For the pound, this is undoubtedly good news. Recall that its growth potential is far from exhausted. We are talking about 500-1000 points of the possible growth of GBPUSD. So we continue to recommend buying a pair.
FX:USOILShort
by Trade24Fx
Good news from US, dollar & new threatsA lot of macroeconomic statistics was published yesterday, however, it did not lead to significant movements. GDP was revised upwards 2.1% instead of preliminary 1.9%, and durable goods orders exceeded the most optimistic expectations (+ 0.6% m / m instead of -0.9% m / m). Well, the number of people receiving unemployment benefits in the United States so generally reached the lowest level since 1973. However, people were not in a hurry to buy a dollar in the foreign exchange market. Even against the backdrop of news that another progress has been made in the negotiation process between the US and China: Trump said that phase 1 of the trade transaction is close to its completion. The lack of reaction to such a clear fundamental positive, in our opinion, is very symptomatic. Accordingly, we are not going to revise our recommendation to “sell the dollar”. On the contrary, thanks to yesterday's data, sale for the dollar against the euro and the Japanese yen became simply excellent as well as Gold. So yesterday's dollar appreciation is an opportunity, not a threat. We continue to monitor analysts predicting an imminent crisis. We are not even interested in the time frame as much as the reasons. So far, our collection has the collapse of the CLO market, the growth of staff salaries and the fall in corporate profits because of this, huge debts both at the state and corporate levels, the collapse of price bubbles in the stock and bond markets, trade wars, and growing inequality in world, the end of the business cycle. So today in our piggy bank replenishment: a crisis in the banking system of China. According to the Bank of China, more than half of Chinese banks may collapse if the economic situation in the country worsens further. And this is tens of trillions of dollars. For reference: the size of China's banking system is about $ 40 trillion, which is two times bibber than the US banking system. That is the problem. So we find another confirmation of our basic investment strategy: to shorten the US stock market while buying safe-haven assets (gold and Japanese yen). Well, in conclusion, we note that the spring is now compressed to its limit (for example, the volatility of the euro has reached a historic low).
TVC:DXYShort
by Trade24Fx
About the recession, markets immunity to good news & US GDPThe US and China have traditionally been optimistic about the progress in the negotiations, but apparently, the markets no longer respond to this. If you yell “wolf”, in the end, people will no longer come. Something similar we can see in the negotiation process between China and the United States. They have been optimistic for more than a month, but there is no breakthrough. In this regard, we will continue to look for points for the purchase of safe-haven assets, which are providing excellent entry points. We will bring up a topic of the upcoming recession. In yesterday’s review, we wrote about the forecasts of Societe Generale analysts who expect a recession in the spring of next year. Recall, in March 2019 the so-called yield curve inversion took place (an anomalous situation when the yield on short-term US treasury bonds exceeds the yield on long-term bonds). As a rule, after this, a recession occurs within 12-18 months. Despite the fact that now the yield curve has returned to normal. In the spring comes the end of the countdown of 12 months. So analysts at Societe Generale are probably not mistaken. Fed Chairman Jerome Powell, meanwhile, once again confirmed that the US Central Bank is likely to continue to hold a pause in interest rate policy actions. Today, unlike Monday and Tuesday, will be quite busy in terms of macroeconomic statistics. First of all, we are talking about data on US GDP for the third quarter. Given that this is the second reading of the indicator, that is, the revised value, we do not expect any serious surprises. However, analysts do not expect as well, predicting the immutability of the preliminary assessment of 1.9%. In addition, you should pay attention to orders for durable goods in the United States, as well as the ADP report on the level of employment in the private sector. A busy day for the dollar will end with the publication of statistics on personal income and expenses, as well as incomplete transactions for the sale of housing. Recall our position on the dollar - to look for points for sale for almost the entire spectrum of the foreign exchange market. But today we are acting with an eye on the output data. This is not about changing the direction of the trades, but about the possible emergence of more interesting points for its sales.
TVC:DXYShort
by Trade24Fx