News background and trading ideas on 18.09.2018
In terms of macroeconomic statistics, today promises to be exceptionally calm. However, he will hardly be calm. The markets will continue to watch with tense the US trade wars against China and the world. And it's not even about $ 200 billion in additional goods that will be subject to tariff increases by the US (according to the latest information, Trump approved them, and they will be introduced next week). The problem is in the trend - the appetite comes with food and in its quest to "make America great again" Trump can go further, much further. Here is one of his last quotes about this:
"The tariffs put the US in a very strong negotiating position, billions of dollars, and jobs flowing into our country - and at the same time, the growth of costs is almost imperceptible. If other countries do not enter fair deals with us, they will be charged with tariffs. "
The actual drop in the stock market of China to the minimum for the last 4 years marks a clear confirmation that the process is on and does not stop to stop.
Recall that the aggravation of trade wars causes the depreciation of the currencies of developing countries, which provokes the growth of the dollar in the foreign exchange market. So, while events develop as they develop, dollar purchases seem to us the most acceptable basic trading strategy in the foreign exchange market. But not against all currencies. Recall, we recommend buying Canadian dollar and pound.
In this light, it is worth paying attention to the Australian dollar, which also suffers from trade wars. But literally today, the Reserve Bank of Australia said that the most likely next move by the Central Bank is an increase in the rate. So, the Australian dollar starts to accumulate potential for growth.
The current week promises to be if not decisive, then very important. On Thursday, the results of negotiations on NAFTA should be announced. So, we are preparing for a surge in volatility in the Canadian dollar.
The week will be very important, well, or at least interesting for the pound. The fact is that this week is the European summit - the first of three key meetings. On Wednesday, Teresa May travels to Salzburg, so news from the Braxit fields will be guaranteed, and there will also be volatilities in pounds pairs. We continue to follow developments.
Total, our basic trading ideas remain relevant:
1. To buy the British pound is the basis - our conviction that the Brexit deal will still be concluded, and the current pound prices consider the option without a deal. That is, the pound is highly undervalued (in case of an agreement). In addition, in the last couple of weeks, the statistics on the UK economy have been very encouraging: the topic of GDP growth is higher than expected, unemployment is at the lowest level for the past 40-plus years, and the Bank of England is behaving quite aggressively, at least in words (recall at the end of the last meeting Bank of England, it was stated that the withdrawal without a deal would be the reason for the Central Bank to raise the rate again). Total - looking for points for purchases, medium-term goals extend to 1.41-1.43.
2. Sell the USDCAD pair - the reason is again our conviction that a deal on NAFTA will be concluded. And current prices reflect rather fears of non-inclusion of the transaction. That is, the Canadian dollar looks undervalued relative to the US dollar. You can sell both around 1.3050, and higher, for example, 1.3150 (if the pair is substituted). The minimum target is 1.2880, but it is possible for the pair to deeper to 1.2680 and even lower.
3. To sell the Russian ruble - the Central Bank's rate hike of 25 basis points on Friday is a formally positive signal for the ruble. But we view this event solely as an opportunity to sell the ruble more expensively. The Central Bank of the Russian Federation behaves quite inconsistently, which means that there is no strategy for action. Situational reactions of the Central Bank are just an attempt to extinguish a fire. But the "building" is already embraced by the flames. So we buy a pair USDRUB from the current. The minimum targets in the region are 70-71. But it is better to take a medium-term position, then everything can be much more interesting in terms of profitability.
We will continue to monitor what is happening in the financial markets and keep you informed.
"The tariffs put the US in a very strong negotiating position, billions of dollars, and jobs flowing into our country - and at the same time, the growth of costs is almost imperceptible. If other countries do not enter fair deals with us, they will be charged with tariffs. "
The actual drop in the stock market of China to the minimum for the last 4 years marks a clear confirmation that the process is on and does not stop to stop.
Recall that the aggravation of trade wars causes the depreciation of the currencies of developing countries, which provokes the growth of the dollar in the foreign exchange market. So, while events develop as they develop, dollar purchases seem to us the most acceptable basic trading strategy in the foreign exchange market. But not against all currencies. Recall, we recommend buying Canadian dollar and pound.
In this light, it is worth paying attention to the Australian dollar, which also suffers from trade wars. But literally today, the Reserve Bank of Australia said that the most likely next move by the Central Bank is an increase in the rate. So, the Australian dollar starts to accumulate potential for growth.
The current week promises to be if not decisive, then very important. On Thursday, the results of negotiations on NAFTA should be announced. So, we are preparing for a surge in volatility in the Canadian dollar.
The week will be very important, well, or at least interesting for the pound. The fact is that this week is the European summit - the first of three key meetings. On Wednesday, Teresa May travels to Salzburg, so news from the Braxit fields will be guaranteed, and there will also be volatilities in pounds pairs. We continue to follow developments.
Total, our basic trading ideas remain relevant:
1. To buy the British pound is the basis - our conviction that the Brexit deal will still be concluded, and the current pound prices consider the option without a deal. That is, the pound is highly undervalued (in case of an agreement). In addition, in the last couple of weeks, the statistics on the UK economy have been very encouraging: the topic of GDP growth is higher than expected, unemployment is at the lowest level for the past 40-plus years, and the Bank of England is behaving quite aggressively, at least in words (recall at the end of the last meeting Bank of England, it was stated that the withdrawal without a deal would be the reason for the Central Bank to raise the rate again). Total - looking for points for purchases, medium-term goals extend to 1.41-1.43.
2. Sell the USDCAD pair - the reason is again our conviction that a deal on NAFTA will be concluded. And current prices reflect rather fears of non-inclusion of the transaction. That is, the Canadian dollar looks undervalued relative to the US dollar. You can sell both around 1.3050, and higher, for example, 1.3150 (if the pair is substituted). The minimum target is 1.2880, but it is possible for the pair to deeper to 1.2680 and even lower.
3. To sell the Russian ruble - the Central Bank's rate hike of 25 basis points on Friday is a formally positive signal for the ruble. But we view this event solely as an opportunity to sell the ruble more expensively. The Central Bank of the Russian Federation behaves quite inconsistently, which means that there is no strategy for action. Situational reactions of the Central Bank are just an attempt to extinguish a fire. But the "building" is already embraced by the flames. So we buy a pair USDRUB from the current. The minimum targets in the region are 70-71. But it is better to take a medium-term position, then everything can be much more interesting in terms of profitability.
We will continue to monitor what is happening in the financial markets and keep you informed.
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