Dollar, 15 years of war, the terrible May & resignation of May

24 may 2019

Yesterday was quite volatile. Actually, nothing fundamentally new has happened.

First of all, the pound has traditionally updated the new local minima. Theresa May’s resignation seems to have already been resolved for the markets. According to The Times, May will announce her resignation today (Boris Johnson probably will take her place). Despite such an obvious fundamental negative, we believe that the worst has already happened and taken into account the current price of a pound by the markets. So, any changes in the UK will benefit the British currency. Therefore, today we will continue to look for points for pound buying on the intraday basis and in the medium-term.

Meanwhile, analysts are continuing to assess the potential effect of the trade war escalation between the United States and China. In this regard, quite interesting is the assessment of the chief researcher of the Chinese Center for International Economic Exchanges, who said that the United States and China are moving into a new reality of mutual relations, which can be called “fight and talk”. And it will last not for a month, two months or a year.

According to Zhang Yansheng, this state will last for many years and will end no earlier than 2035. According to the expert, exactly that period of time deemed necessary to move from “irrational confrontation” to “rational cooperation”. The forecast is pessimistic, but it makes you think that the current reality is something serious and for a long time.

Meanwhile, May was just a nightmare for the technology sector in China. Here is an instance: Tencent Holdings Ltd., Alibaba Group Holding Ltd., and Taiwan Semiconductor Manufacturing Co. the lost over a month is $ 170 billion of capitalization (!!!).

A block of data on business activity indices in Europe and the USA was published yesterday. The situation is "not ok" in Europe. The PMI in the manufacturing sector in Germany is still below 50 (value for May 44.3). Germany's IFO Expectations Index is at 4-year lows. So, the main economy of the Eurozone seems frankly unhealthy. At the same time, the Composite PMI index for the Eurozone appeared slightly worse than expected, but it turned out to be above 50 (value for May is 51.6). So, for the euro buyers, there’s nothing to rejoice at.

Moreover, the data from the United States appeared even worse. Sales of new houses in the US fell by 6.9% to 673 thousand units in April. At the same time, the PMI index of business activity US manufacturing fell to 50.6 points in May (compared with 52.6 in April). This is the lowest value since September 2009.

Against this background, oil continued to crumble. Those readers who listened to our advice and recommendations should have earned good money this week.

Our trading positions on the last day of the week did not change much: we will look for points for buying the euro against the US dollar, sales of oil and the Russian ruble, as well as buying gold and the Japanese yen. In addition, we start buying a pound.