News background & trading ideas for 01/02/2019

1 feb 2019

Yesterday was quite mixed for the foreign exchange market. In the beginning, the dollar was under severe pressure. The reason is apparent - outcomes of the last Fed meeting. However, the second part of the day was already scripted by the dollar.

Today we are quite negative about the dollar. The reason is the publication of statistics on the US labor market. Seemingly that everything should guide our thoughts in a positive way: last month the fact turned out to be 81% better than the forecast, and the figure of +313K was more than impressive. Plus, the data from ADP published on Wednesday also came out better than expected. Despite all this magnificence, we are pessimistic. We consider the positive surf in the past month as an anomaly related to the holiday season in the United States and the increased but temporary demand for labor in the United States. Besides, we are persuaded that the longest shutdown in US history should be reflected in the economy of the United States, and the labor market is one of those components that reacts faster than other indicators. Recall, about 800,000 public officials were for a month without a salary. And the current shape of the US economy, in general, raises questions.

So, we are looking for weak NFP figures. How much worse the forecast, they will come out - this is the question. But a negative surprise can be very, very meaningful. And in this case, the already weak dollar will receive an additional adverse impulse. So we recommend selling the dollar, even without waiting for the publication of official statistics

Getting back to the yesterday’s events, we note statistics on the GDP of the Eurozone. Which, although it came out in the projections, however, looked frankly weak in general. Although the euro was not triggered by this data, but by the comments of the Head of the Bundesbank, Jens Weidmann, who said that Germany’s economic growth in 2019 would be lower than forecasts that were announced only a few weeks before and Germany would soon face an economic slowdown.

Gold continues to increase and only ensures us in our recommendations, which we have been voicing since the time of hold 1235 - the efficiency of buying gold both intraday and in the mid-term. The current movement has not yet exhausted its potential, and the reach of 1350 looks like the only logical scenario. So we continue to recommend gold purchases.

Since oil keeps holding above 53.50 (WTI brand), its intraday purchases remain relevant either. Meanwhile in mid-term we sale the oil.

Besides, we recommend sales of the Russian ruble even despite the current weakness of the dollar. In the end, from our point of view, the Russian ruble will be weaker anyway.