News background & trading ideas for 07/03/2019

Wednesday has brought nothing new to the power structure in the financial markets. The Bank of Canada left the bet unchanged. A solution that has already been taken into account by the markets. But the extremely weak data on the Ivey PMI Business Index (50.6 vs. January 54.7) and the general sentiment in the foreign exchange market against the Canadian dollar, which became sharply negative after the publication of weak data on Canada’s GDP last Friday, has triggered another round of sales USDCAD . Nevertheless, we continue to go against the market looking for points for selling USDCAD on the intraday basis with small stops.

As for the US dollar, the data on employment in the private sector from ADP appeared slightly worse than forecasts (+183,000, with the forecast of +190,000). Nothing, but a wake-up call on the eve of Friday data on the NFP, but we will more thoroughly discuss that tomorrow. We also note the growing US trade balance deficit, which amounted to $ 59.8 billion in December. That turned out to be much worse than the previous figure- $ 50.3 billion, and forecasts also (- $ 57.9 billion). In general, this is extremely unpleasant news for the dollar (the deficit reached its maximum in the last 10 years). For now, markets choose to ignore both the US budget deficit and the trade balance deficit. They cannot not always ignore that, but sooner or later the dollar will be billed. But so far, these figures are out of focus of the markets.

In relation to the news the following day is interesting because of the announcement of the results of the ECB session. Surprises are not expected on the markets: No further changes to monetary policy are expected. Also pay attention to the data on the GDP of the Eurozone. The euro is close to the lower boundary of the current fluctuation band, so we believe that this is a good opportunity to buy EURUSD.
Due to the lack of progress in the Brekzit negotiation process, the pound continues to be under pressure. Voting in the UK Parliament is scheduled for the next week. If Teresa May fails again, otherwise the situation will worsen. However, we consider the current situation as part of a big game with a previously known result. So we continue to buy the pound.

And another news interesting to us is the decision of the largest Russian non-state pension fund, which is owned by Sberbank, to reconsider the structure of its investment portfolio. It is about reducing the share of OFZ. This decision is fraught with the sale of OFZ worth tens of billions of US dollars. We recall that OFZs are almost the only source of financial resources for the Russian Federation in conditions with limited access to global financial markets. It is possible that such a decision is an attempt to prepare for possible new sanctions from the United States. The sharp intensification of investigations of money-laundering in Russia is a symptomatic situation on our point of view. As usual, we sell the Russian ruble in the medium and even long-term directions.

While gold is below the 1295, we recommend to sell it on the intraday basis. At the same time, we buy oil (especially since oil reserves in the USA have sharply increased over the week), as well as USDJPY.