News background and trading ideas for 21/11/2018

21 nov 2018

Yesterday in the foreign exchange market the wind has changed once again (the dollar in power again), issues in the cryptocurrency market as well as in the stock market continue to take place. Tellingly, all this was going on without explicit informal injections.

Generally, the picture turns out to be sad both for cryptocurrency buyers and for the bulls in the US stock market as well. Bitcoin has already lost around 80% of its worth and apparently, its intends to waste more. And the US stock market has officially passed to the bearish territory after the loss of 20% from maximums. So we need to think once again about the needless to swim against the current in these markets. Actually, Goldman Sachs has already had words and recommended actively get out in the cache in order to wait out an inauspicious period.

However, we need to swim from time to time against the tide. We mean our long-term position on the British pound. Chairman of the Bank of England Mark Carney yesterday has openly stated that the high volatility in pounds pairs will remain up to the end of the negotiations between the UK and EU. Besides, he emphasized once again that the exit without the deal is fraught with a chaos. Which means, actually, he has played along Theresa May in her attempt to push the required vote in Parliament.

Our trading idea has been adopted by UBS Group, which analytics consider current prices are attractive for the pound’s purchases and the implementation of the scenario of “harsh Brexit” would hardly send the currency much lower.

From the general informational background, Italy and its tensions with the EU stand out as usual. Recall the Italian budget deficit exceeding the permissible limit, as reported by the country in the EU. But the depressing thing for the euro is that the Italian authorities confirmed the main parameters of the country's state budget, including the growth rate of GDP and the size of the budget deficit, despite the fact that they were previously rejected by the European Commission. In essence, this is a deliberate escalation of the conflict. Amid such sabotage, talks about another split in the EU and even Italexit have immediately arisen. Such news, of course, put pressure on the euro. So yesterday's drop in the single European currency is quite natural. Meantime, the dollar yesterday felt in the foreign exchange market very well. Talking about the Fed and easing of monetary policy taken a back seat so far.

Beyond that, the basic arsenal of our positions is unchanged: mid-term oil sales (tellingly, yesterday's data from API, which have shown a reduction in US oil reserves for the first time in the last 8 weeks, were completely ignored by the market, which indicates its narrow focus both in action and in the perception of information) and the Russian ruble. Intraday purchases of gold (from hourly support levels), as well as sales of the USDCAD pair in the hope of good macroeconomic statistics for Canada, which is scheduled to be published on Friday.