Keeping the peace in a troubled world, IMF forecasts

15 oct 2019

Even though yesterday in Japan, the USA and Canada was a day off on the financial markets we cannot but call that day like a calm one. As it was expected, a mini pound bubble burst. The lack of new positive drivers forced the most impatient to take profits of about 500 points. Plus, fears that the deal will fail again remains relevant. In particular, the EU’s chief Brexit negotiator, Michel Barnier, said that the current version of the deal lacked detail, which could lead to potential time pressure (there is too little time to discuss all the important points - the summit will be held on Thursday).

Our recommendation is to buy the GBP remains relevant. Remember about stop loss, because the potential of the pound growth is far from exhausted. It can still grow by 500 or even 1000 points. Today we are waiting for statistics on the UK labour market to come out, which may well trigger a surge of volatility. This should be taken into account when making trading decisions.

Safe-haven assets remain relevant yesterday and the recommendation to buy the yen proved its worth. Indeed, there are many reasons for buying safe-haven assets. It would seem that the agreements between the United States and China have somewhat relieved the tension, but if you look at what is happening from another side, facts side, then nothing has been signed, and in general, we are talking only about the first phase of the agreement. That is, mass exiting safe-haven assets on such news would be at least illogical.

As for the Middle East. Turkey’s ground military operation in Syria, the attack on the Iranian tanker - although these are links of different chains, they only emphasize how explosive the region is. Against this background, reassuring investors would look very strange.

So today we will not only continue to buy the Japanese yen but will also restore our recommendation to buy gold. The reason for the growth of safe-haven assets today may be the IMFforecasts publication on the growth rate of the global economy. If (when) the Fund again lowers its forecasts, the demand for safe-haven assets will have to rise as well as the prices of gold and the Japanese yen.

We draw our readers' attention to excellent points for entering a short position on the EURJPY.

In this light, our position on oil purchases looks problematic. However, the tension in the Middle East and concerns about the oil supply on the market may well balance the weak forecasts for the growth of the global economy and, accordingly, the fears of weak oil demand in this regard. So while oil above 51.20 we will look for points for its purchases with a target of 55-56 (WTI brand).