News background and trading ideas for 10/01/2019

10 ene 2019

Yesterday in the foreign exchange market hasn't been marked by any significant events or surprises. The USA continues to negotiate with China and show some optimism over the outcome of trading talks. In the US the shut-down and tough negotiations between the Democrats and Republicans are going. So, we observe the maintenance of some status-quo, generated at the beginning of the week yet.

However, the momentum to the dynamic in the foreign exchange market was given by comments of Fed representatives, as well as the minutes of the last FOMC meeting, in which the markets found further confirmation that the Fed is closing the rate hike cycle. Accordingly, few people now expect a rate increase in March (now the probability of this is about 5%). Another proof of our recommendation selling the dollar in the currency market.

During such “empty dish” news period the analysts, what is quite natural, have intensified with its forecasts and conspiracy theories. Since the Japanese yen with its flash crash has attracted a lot of market’s parties attention, so precisely it became in focus of analysts. From the one hand, the former CEO director of Bank of Japan had predicted the straightening of yen up to the level of 100 in pair with the dollar.

Besides, an explanation was found for the decline of the yen after a sharp increase during the flash crash. According to rumors, two large trillion-dollar investment funds with total assets managed to fix profits on long positions in the yen after a flash crash, which caused a sharp increase in yen sales in the foreign exchange market and put pressure on the yen quotations. Amid such news, we only strengthen in our recommendation on purchases of the Japanese currency on all fronts of the foreign exchange market.

Another potentially significant news became information from Fitch that the ranking agency may decrease the US sovereign index. The last time that occurred in 2011, when Standard and Poor’s downgraded the US ranking. The US stock market underwent massive sales then.

The Bank of Canada, that’s to be expected, remains the rate unchanged yesterday.

Concerning today, the speech of Jerome Powell may well provoke a volatile splash in dollar’s pairs. However, it’s unlikely he will voice something fundamentally new.

In the oil market, meanwhile, the bulls continue to dominate and invade a very interesting level zone 50-53.50 for the WTI brand. If it succeeds in slipping through, the correction may well turn into a local uptrend. But until that happens, the points for oil sales look very interesting and promising. So we use the moment and sell oil.