Projection on ADP:
ADP is trading is the middle of the projection.
Overall the stock is trading in the bullish form after a continuous fall.
ADP
The NFP and the OPEC data & few reasons for pessimismFriday promises to be an extremely eventful and interesting day. On the one hand, statistics on the US labor market will not let you get bored in the currency and stock markets, and on the other hand, the results of the OPEC meeting will determine the dynamics in the oil market. We will talk about this and much more in today's review.
But let's start traditionally with news about the coronavirus. As the number of cases in the world grows, measures to contain the epidemic are tightened. Italy closes schools and restricts public gatherings. Companies continue to revise their forecasts for financial results. Quite frightening figures were noted by the International Air Transport Association. According to their experts, the industry’s losses from coronavirus may amount to $ 113 billion.
And there are already the first victims of this. Chinese Tourism and Financial Conglomerate HNA Group Co. was taken under state control. That is, in fact, the company ceased to exist as an independent entity. Indicative in this case is the fact that one of the main reasons for the fall of the company was its high debt cut (about 85 billion). The evidence is that this is generally very typical of Chinese companies (overblown debts). HNA Group Co. clearly demonstrated how quickly one of the fastest-growing companies can go bankrupt. In general, there are enough reasons for pessimism.
Realizing the impasse of monetary incentives, more and more countries are using fiscal instruments (mainly increased government spending) as a measure to combat the effects of coronavirus. Asian countries are so far ready to pour in up to $ 40 billion, and the United States - about $ 8.
They are also trying to fight the consequences of coronavirus in OPEC. Today there is an attempt to carry out the following agreement: to withdraw from the market another 1.5 million b/d with a minimum of the end of the second quarter. So far, Russia remains a stumbling block. If she can be persuaded, a very serious reason for price increases will appear in the oil market. So today we will buy oil in the hope that everyone will agree. The deal seems to be quite good, if only because the stops are relatively small (places below 44 or closes on the fact of negative news), but the profits are very ambitious (an increase of up to 57 or even higher for the WTI brand).
The key event of the day for other financial markets will be the publication of statistics on the US labor market. Since the data will be for February, there is a risk of failure in the numbers of NFPs in connection with the coronavirus epidemic. However, the dollar has already lost quite a lot in the foreign exchange market, and the data from ADP came out unexpectedly good, so today we will buy the dollar.
What does a market reaction to the Fed's decision say?Since yesterday, by and large, was the first full day of working out the Fed’s emergency decision to lower the rate by 0.5%, today some results can be summed up. And they are generally disappointing for optimists. In theory, stock markets should have perked up and provoked a sharp increase in stock indices. But this did not happen, that is, there was growth, but not at the scale that could be expected. In theory, the pressure on the dollar should have intensified. But yesterday, the Dollar Index rose. In theory, the Fear Index was to drop significantly. But according to the results of yesterday, the decrease was insignificant.
What are all these signals talking about? The magic of Central banks no longer works the way it used to. Lower rates no longer automatically resolve existing problems. And this is a very alarming signal for stock market buyers, gold sellers, and other optimists. It seems that the bubble is nevertheless broken and the air, despite all the efforts of its creators, is gradually coming out. In general, monetary policy has exhausted itself and this is an extremely alarming signal: if the situation worsens, it will not be possible to resolve the situation with the usual methods.
The consequences of the coronavirus have not even begun to appear, and Nasdaq is quoted 10% below the maximum and, it seems, can no longer grow with the certainty with which it was literally a couple of weeks ago.
So in everything that happens, we see the strongest confirmation of our basic investment ideas: sales on world stock markets, and especially on the US stock market; gold purchases and sales of risky assets (such as the Russian ruble).
But back to the events of yesterday, which was very full of news. The Bank of Canada lowered the rate immediately by 0.5%. The Canadian dollar obediently worked this out, losing about 100 points paired with the dollar. But in general, the reaction was relatively calm at such a massive reduction in rates.
US employment data from ADP turned out to be quite good: +183K with a forecast of +170K. What sets in a positive mood against the dollar ahead of Friday's official statistics. The ISM Index in the non-productive sphere also pleasantly surprised: 57.3 points with a forecast of 54.8 points. But the Eurozone indices traditionally fell short of expectations and for the most part, came out worse than forecasts.
Well, the results of super-Tuesday played into the hands of the dollar, on which Biden won quite unexpectedly, who is considered a more adequate option from the Democrats as opposed to the “left” Sanders.
In general, our desire to sell a pair of EURUSD intensified up to the recommendation to sell the pair from the current ones with the addition of any attempt to grow.
Oil stocks in the United States have grown quite slightly, but all the attention of oil market participants has been riveted to the OPEC meeting and OPEC+ decisions. It is very likely that today some specific information will appear that could provoke strong movements in the oil market. If OPEC+ decides on additional reductions (ideally about 1 million b/d), oil has a chance of growth. The main stumbling block is Russia and its unwillingness to scale up the reduction.
EURUSD Probabilities For Pullback? Mid Term PossibilitiesTechnically exhausted bulls and tonight we have Businesses & Employment reports incoming from the US (ADP, ISM, and PMI) which are some key data representing the US economic outlook. Any unexpected numbers can spark volatility on this major pair. We had a 50bp emergency rate cut which was a surprise last night from FED and the aftermath outcome for the king was not good which we can know by watching over DXY around the floor (lately did rebound upward showing some correction hope). Exhausted euro bulls and oversold dollar make me think if tonight somehow the US passes a good outlook on those key reports then it can be a chance for the greenback for retracement over a shorter time horizon around 32.80% Fibonacci which line up with last time R1 of the W period pivot. I won't say that this major pair may have a full reversal at this point by knowing that FED has probabilities of 2 more rate cuts this year. It is the nature of the market to fall and rise back harder or rise and then fall back harder on the various factors of the underlying asset. Nothing goes to hell or heaven straight forward. Last night market players have pushed price further upward on this major pair after knowing FED surprise announcement which let me think psychologically and technically once at this point that there may not be more room left upward for this pair (overbought oscillators condition too). Even if the news doesn't favor the US tonight it has already priced in finely last night so possibilities can be just opposite creating a sell-off scenario (don't forget what happened with AUDUSD even after the cut by RBA last day). Even if reports end up being good for the US then also bear have some reason to push the price lower where market is already overbought for this major so that make some sense too. In both cases, it seems we may today have some pullback in this pair hypothetically talking.
Where to buy ADPHealthy balance sheet.
I do not hold positions in this investments. No recommendations are made one way or the other. If you're an investor, you'd want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.
Week Results: Virus, NFP, Pound & Investor ConcernsA week in the financial markets was held in the chronicles of the coronavirus. The epidemic is still under development. The number of deaths exceeded 700, and the number of deaths approached 40,000. A number of quarantined cities in China, many plants are idle, are already starting to disrupt the functioning of the global economy: some companies outside of China cannot continue the production process, since components from China do not arrive, some ( like Toyota and Honda) temporarily shut down their Chinese capacities and sharply lose in production volumes, some (like Apple) close their stores in China.
And if on Monday and Tuesday last week, the markets still tried to pretend that they did not notice this, then towards the end of the week even excellent NFP figures could not inspire American investors to buy on the stock market.
And although the VIX Fear Index fell by 15% over the week, there is a feeling that the time of unbridled euphoria in financial markets is coming to an end. And this means that now is the time to start opening short against risky assets. Moreover, the markets marked the highs, respectively, the points for placing stops are obvious, and the stops themselves are small especially with respect to the goals that can and should be set.
The week as a whole turned out to be very successful for the dollar and ended on a major note: NFP figures came out well above market expectations (+225K with a forecast of +165K). In principle, employment data from ADP (+291K) were prepared by the markets for good numbers, but until the very last it was difficult to believe in them. The overall view was somewhat spoiled by weaker than expected growth rates of hourly wages, as well as unemployment, which went above forecasts.
The main losers in the foreign exchange market were the euro and the pound. Traditionally, the reason for the sale of the euro was the weak macroeconomic statistics from the Eurozone. So German industrial production in December literally collapsed by 3.5% during a month, recalling that the recession is not just an economic term, but also one of the aspects of reality. As for the pound, the pressure on it was due to growing fears that the UK and the EU would not be able to agree on a trade agreement until the end of 2020.
Our trading plan for this week is next. We continue to look for points for purchases of gold and the Japanese yen anyway (unless an ultra-effective vaccine is found and the epidemic of coronavirus is quickly over). We will wait until the euphoria around the dollar subsides, and we will look for points for its sales. The pound is not bad, the Canadian dollar looks interesting. We won’t touch the euro - the single European currency seems too toxic in the light of the latest data from Germany. While oil is below 51.20 (WTI benchmark) - we sell it with stop-flips above 52. In general, the situation with oil looks rather uncertain. OPEC +’s decision to expand the decline in oil production by 600K bd is, under normal conditions, the strongest bullish signal.
NFP Day, Coronavirus Chronicles, Pound WeaknessThe main event of today will be the publication of official statistics on the US labor market. On average, experts expect a gain of 162K. This is more than it was in the previous month, but less than the average value for the last couple of years.
In general, it is worth noting that the trend towards a decrease in the number of newly created jobs with each new publication of data is becoming increasingly apparent. After the peak values of 2014 (then about 3 million new jobs were created during the year), the indicator was constantly decreasing, with the exception of 2018, when Trump's tax reform affected, but already in 2019, the effect had exhausted itself. So the US labor market in 2020 looks rather vulnerable.
Especially in light of the coronavirus epidemic, which continues to gain momentum: the number of deaths is close to 600, and the number of deaths is close to 30,000. Quarantine continues, and more and more countries completely or partially interrupt a transport connection with China.
In this light, data on the US labor market may well be unpleasantly surprising. The only thing that holds us back from frankly negative forecasts is the excellent employment figures from ADP (+ 291K). Although they can play a trick on the dollar because against the background of such numbers, almost any statistics on the NFP will seem weak.
In total, we will not be surprised at the weak NFP figures, but we would not dare to put on this forecast. Instead, we offer traditional news trading in a pair of USDCAD. Recall that in parallel with the data from the United States will be published statistics on the labor market of Canada. That is, the USDCAD pair has a chance of a double impulse with no obvious direction. So a minute before the publication of data, we place pending orders such as stop orders for purchases and sales at 20-25 points from the current price at that time. And just waiting for the data. If there is a situation with data overlay (positive for the Canadian dollar and negative for the American or vice versa), then we remain in position until the end of the day.
To other news and events of yesterday. In the foreign exchange market, the pound was under pressure amid growing investor concern over the outcome of trade negotiations between the UK and the EU. We believe that the parties will agree. In the end, the United States and China were able to enter the first phase, let alone Britain and the EU. So pound purchases remain one of our favorite forex positions.
For other assets and markets, buying gold and the Japanese yen is still a priority. But with oil we, perhaps, will wait a while. The asset can not decide who it is - buyers and sellers - so we'll wait for more clarity. Moreover, Saudi Arabia and Russia have been agreeing on something for three days. The outcome of the negotiations could potentially blow up the oil market.
US encouraging statistics & China’s data manipulationsThe news that a coronavirus vaccine has been found so far remains more likely to be rumors and expectations. At least if you look at the official statistics on the number of deaths and cases of coronavirus. The number of deaths approaches 500, and those infected 30,000.
And we are talking about official data. According to many experts, government figures are underestimated at times. The reason for this is both conscious and deliberate manipulation, and a banal inability to take into account all the dead. And while quarantine in China continues, the violation of global supply chains is becoming more and more noticeable every day, as well as the harm it does to the global economy.
Of the other news yesterday, it is worth noting unexpectedly good statistics from the United States. According to ADP, US employment increased by 291K jobs (forecast was + 157K). This is the maximum value since March 2017. Business activity indices were also better than expected. In particular, the ISM Index in the non-manufacturing sector in January reached 55.5 points (the forecast was 55.1).
The dollar against the backdrop of such data strengthened across the spectrum of the foreign exchange market. But this growth cannot be called rampant. So we rather see it as an opportunity to enter the counter-positions from the most attractive points. These are the pairs EURUSD, GBPUSD, USDJPY, and USDCAD. But these inputs are with minimal stops, because a) positions against the current movement; b) the current movement has serious fundamental foundations and momentum for further development.
Shelter-assets paused yesterday in their fall. We remain of our opinion and will continue to look for points for purchases of gold and the Japanese yen both within the day and in the medium term.
Oil yesterday quite unexpectedly showed significant growth. What is characteristic, the growth occurred against the background of official data on oil reserves in the USA, which showed a rather substantial increase. However, this did not prevent the asset (WTI benchmark) from gaining a foothold above 51.20. Our position on the sale of oil eventually lost its relevance. However, if oil goes below 51 again, a short position can be restored.
Thursday in terms of macroeconomic statistics will be a fairly calm day. So we continue to monitor the epidemic and follow the developed plan.
ADP Buyback BoostADP buybacks are supporting the stock, and often driving price upward. The stock remains in a trading range long-term.
Getting ready for the NFP, OPEC & trading on the newsIt is worth noting statistics from the Eurozone that was published on Thursday. On the one hand, as we predicted, Eurozone GDP came out better than expected (+ 0.2% q / q with a forecast + 0.1% q / q). On the other hand, retail sales failed (-0.6% m / m with a forecast -0.5% m / m), and industrial orders in Germany unexpectedly declined (-0.4% m / m with a forecast + 0.4% m / m). However, this did not prevent the euro from strengthening yesterday.
Friday promises to be an exceptionally busy day for financial markets. First, official statistics on the US labour market will be published. Secondly, the results of an expanded OPEC meeting will be summarized. Also, we are waiting for data on the labour market of Canada.
Let's start with an indicator that could potentially trigger volatility in the financial markets. We are talking about NFP. The forecasts, in our opinion, are too optimistic. Although + 180K jobs - almost the average figure of the indicator for 2019, current trends in the US economy show that + 180K is a bit overstated. The fact is that the non-farm payrolls: 180K+ is obliged to the start of the year when in January and February the indicator exceeded + 300K. But such figures have not been shown for a long time so without these two periods, the average in 2019 is less than 150K. 150K seems to us much closer to current realities, and in light of the weak employment rate from ADP published on Wednesday (+67 thousand jobs with a forecast +135 thousand), a figure below + 100K will not surprise us.
So our recommendation for the dollar (in the light of our expectations from the NFP) is to sell the dollar.
Note that the indicator's output between + 120K - + 180K may be completely ignored by the markets.
Concerns about the demarche of Saudi Arabia at the OPEC meeting become irrelevant. On the contrary, there is increasing talk throughout the markets about a possible increase in the volume of reduction in oil production under OPEC + from the current 1.2 million bpd to 1.6 million bpd. However, even if such a decision is made in the oil market, nothing will change - OPEC countries are now extracting less than is stipulated by the agreements.
Our position on oil is unchanged so far - oil growth is a great opportunity for asset sales.
Today promises to be over-volatile for the USDCAD due to the simultaneous publication of labour market data from both the United States and Canada. Given the uncertainty related to the data, our recommendation for working with a pair today is to trade pending orders. Before the data is released, we place pending orders of the buy stop and sell stop type at 20-30 pips from the current price at that time. And then we just wait. That will almost certainly provoke the formation of a strong unidirectional movement, you can earn on.
Getting ready for the Bank of Canada decisionAs we announced, the demand for safe-haven assets increased significantly this week, which provoked both an increase in gold quotes and a strengthening of the Japanese yen. And if the reason for this was an increase in tariffs on imports to the United States of aluminium and steel from Argentina and Brazil on Monday, then on Tuesday Trump intimidated to introduce an additional 15% of tariffs on Chinese imports in the amount of $ 160 billion on December 15.
At the same time, he added that he was not in a hurry and the best time to conclude a trade deal was generally after the 2020 elections.
Of course, Trump should not be taken seriously, such his comments are a clear attempt to force China to be more accommodating in the negotiations. Nevertheless, the reaction of investors can be understood.
Given that gold may easily grow (50-70 dollars per ounce), it is likely that yesterday's growth is only the beginning. So we continue to recommend looking for points of purchase for safe-haven assets.
It is worth noting the decision of the Reserve Bank of Australia to leave the rate unchanged, which is generally a positive sign for the Australian dollar. Although its growth potential so far seems limited, it could still grow (50-70 pips), especially against the background of a weak dollar.
US employment data from ADP traditionally published on the eve of official statistics is what we are waiting for. Although the level of correlation between ADP and NFP data is insignificant, strong deviations of the data from forecasts may well be flustrating to the markets.
The Bank of Canada will announce its decision on monetary policy parameters. We expect the current status quo to be saved. But a change in the nature of the rhetoric of the Central Bank may well provoke a jump in volatility. Recall that our position on the Canadian dollar is to buy. That is, selling a USDCAD above 1.33 is, in our opinion, a great trading idea.
The oil market is getting ready for the OPEC meeting. Globally, we remain supporters of oil sales. But for now, until the end of the week we take a break - the meeting may well surprise, but betting on red or black is not our approach, we prefer to work with facts.
About the recession, markets immunity to good news & US GDPThe US and China have traditionally been optimistic about the progress in the negotiations, but apparently, the markets no longer respond to this. If you yell “wolf”, in the end, people will no longer come. Something similar we can see in the negotiation process between China and the United States. They have been optimistic for more than a month, but there is no breakthrough.
In this regard, we will continue to look for points for the purchase of safe-haven assets, which are providing excellent entry points.
We will bring up a topic of the upcoming recession. In yesterday’s review, we wrote about the forecasts of Societe Generale analysts who expect a recession in the spring of next year.
Recall, in March 2019 the so-called yield curve inversion took place (an anomalous situation when the yield on short-term US treasury bonds exceeds the yield on long-term bonds). As a rule, after this, a recession occurs within 12-18 months. Despite the fact that now the yield curve has returned to normal. In the spring comes the end of the countdown of 12 months. So analysts at Societe Generale are probably not mistaken.
Fed Chairman Jerome Powell, meanwhile, once again confirmed that the US Central Bank is likely to continue to hold a pause in interest rate policy actions.
Today, unlike Monday and Tuesday, will be quite busy in terms of macroeconomic statistics. First of all, we are talking about data on US GDP for the third quarter. Given that this is the second reading of the indicator, that is, the revised value, we do not expect any serious surprises. However, analysts do not expect as well, predicting the immutability of the preliminary assessment of 1.9%. In addition, you should pay attention to orders for durable goods in the United States, as well as the ADP report on the level of employment in the private sector. A busy day for the dollar will end with the publication of statistics on personal income and expenses, as well as incomplete transactions for the sale of housing.
Recall our position on the dollar - to look for points for sale for almost the entire spectrum of the foreign exchange market. But today we are acting with an eye on the output data. This is not about changing the direction of the trades, but about the possible emergence of more interesting points for its sales.
Data from ADP, unstable gold and weak oilThe publication of US employment data from ADP came out yesterday. However, the outcome did not form positions in the markets. The + 135K figure came out almost in line with forecasts (experts expected + 140K), so the markets did not get an answer to the question of what to expect from the NFP figures. Although in general, the vector is unpleasant for the US economy and the US dollar in particular ( a decrease in the number of new jobs and a gradual deterioration in the US labour market). So our position on the dollar today is unchanged - we will continue to look for points for its sales.
QAs for the dynamics of gold. Breakdown 1485-1490 gave the asset a sign to go down. The lows in the region of 1460 are in favour of that. But weak data on the US economy on Tuesday turned the situation upside down. Yesterday’s value of 1290 means the return to the bull market and the end of the correction. But since statistics on the US labour market will make the next batch of corrections already on Friday, we refrain from recommendations on gold this week: we will wait until the markets still decide whether to grow or fall.
As for the oil. The market-determined the basic drivers: a slowdown in the global economy as a negative factor in demand and production restoration by Saudi Arabia as a positive factor for supply. As a result, sellers continued to dominate, and in the evening also intensified amid information about US oil reserves. According to the Ministry of Energy, weekly stocks rose by 3 million barrels, which is a bearish signal. So today we do not see any special reasons for the growth. But on Friday may well be adjustments. So on Thursday, we will continue to look for points for oil sales, but exclusively on the intraday basis. Although we note that oil prices have almost reached the calculated points for the current decline, announced by us on Monday.
As for China and Germany, we do not expect anything special today. Tomorrow we are waiting for statistics on the US labour market, there is every reason to expect a relatively calm day, during which the markets will prepare for NFP data to realize. So today you can try to concentrate on active oscillatory intraday trading. For example, use clock oscillators and sell from the local overbought area and buy from the local oversold area. That is, to work without any obvious preferences.
Bank of Australia, euro immunity and dollar failureThe US dollar confidently dominated before the ISM index in the US industrial sector outcome, but after failure followed.
The Australian dollar responded to the actions of the Central Bank. We observed decreased after the rate was reduced (the Reserve Bank of Australia yesterday lowered the rate by 0.25% to 0.75%. This decision was expected by participants in financial markets). In general, we received one more confirmation in favour of the formation of a global vector for the widespread easing of monetary policies by leading central banks of the world.
The current value of the Australian dollar shows interesting for purchase. Given that the ratio of potential profit / expected loss in the AUDUSD is close to ideal, today we will try to buy a pair based on the fixation of profits or just working off the level of 0.67. Stops below 0.6660, but the profits can be set in the area of 0.6800.
The Australian dollar was not the only one the US dollar was strengthening. Another currency is the British pound. But again, it can be understood, the political sphere of Britain is getting closer to a complete dead end. The data on the PMI index of business activity in the manufacturing industry, although came out much better than forecasts (48.3 points with a forecast of 47.0), still turned out to be significantly lower than 50.
The euro received another painful hit. This time, the PMI in the manufacturing sector disappointed (with the forecast 45.7). However, there were no euro sales, which suggested the formation of a bottom from which it might be able to push off and develop a correction.
In the USA, meanwhile, political conflict continues. The "X" moment came after the publication of data on the ISM index in the US industrial sector. The index fell to the lowest level since June 2009 - 47.8 points. Recall that an index exit below 50 means decrease inactivity. The markets took this as a signal that the Fed would raise interest rates again in 2019 and rushed to sell the dollar.
We have been waiting for these sales for a couple of days (see our previous reviews). We consider yesterday's dollar decline only the beginning of its fall and today we will continue to look for points for its sales in the foreign exchange market. But at the same time, we note that yesterday's data was not something outstanding and sales were more related to expectations of possible weak data from the NFPs to come out than to the actual reaction to the ISM Index.
Pay attention to the statistics on US employment from ADP. Although traditionally these data do not lead to a sharp increase in volatility, in general, the correlation with the NFP is small (about 20-25%), nevertheless, the state of the US labour market is one of the key moments, so a surprise may well provoke, for example, the long-awaited dollar sales by us. But for this, the figure should be below 100K.
ADP Platform Sideways PatternADP has shifted to a Platform sideways candlestick pattern, and is experiencing some Dark Pool Quiet Rotation™. However, there is underlying buying activity of Smaller Funds, Professional Traders, and Investors. The candlestick pattern is compressing on the upside of the Trading Range at this time.
NFP, pound growth and goldEverything develops according to the scenario described earlier - Johnson’s defeat in Parliament is an occasion for the pound growth and its purchases. However, it’s too early to relax. Yes, the pound still has the opportunity to grow for not just a hundred points, but a thousand or even more. The key threat to the pound has not disappeared yet. So you should trade cautiously.
There is every chance that the ban on exiting without a deal will acquire the status of the law, which means Johnson will not be able to do anything. Even his brother Joe denied Johnson. So the streak of setbacks for the new prime minister is going on. But Johnson's failure is the success of the pound.
US employment data from ADP surprised us. + 195 000 with a forecast +148 000. And the data surprised us because recently the US economy has been showing more and more disturbing messages such as GDP data for the second quarter, and business activity indices, some even went below 50.
So, despite yesterday's figures from ADP, we are rather sceptical about official statistics on the US labor market. In general, today's data is more important than ever. On the one hand, weak figures will confirm investors' concerns that the US economy is losing its confidence more rapidly. And on the other hand, it will become a signal fo the Fed that it is necessary to do something. That is, the fate of the rate cut may not be decided on September 18 at the FOMC meeting, but today.
Therefore the dollar may receive a double hit, from which it will not be able to recover for a long time. That is why today we recommend selling the dollar across the entire spectrum of the foreign exchange market. But we need weak NFPs for that.
As for the trade war. The US and China negotiations were postponed. Now the date sounds like “early October.” That is, the confrontation will continue in September. So do not forget to buy gold.
Chart of the day: $ADP ABCD completionAnybody saw $ADP hitting its ABCD completion? Trump has overshadowed the fact that US Services PMI just came in 2pts below expectations and the major auto companies have been laying off workers as inventory piles up. ADP operating margins are at -1 standard deviation levels while its valuations metrics are at +1 standard deviation into a slowing economy. 1.6% forward real earning yield with a P/B of 13x (mean P/B @ 7x) when you can buy risk-free US 10-yr at 1.7% with capital appreciation potential? *cough* *cough*
No thank you very much.
P.S. Even Bill Ackman sold his oversized stake in $ADP.
ADP, ECB’s new head & July 4thThe publication of data on employment in the US private sector from ADP was the main even. Considering that official statistics from the US Department of Labor will be published tomorrow, traders and other financial market participants are expressing interest in. Analysts had expected growth in May (140K) however, the number is + 102K, only. On the one hand, the data is lower than forecast, on the other hand, it is significantly higher than the previous frankly disastrous numbers (recall that last month the increase was 27K, only). Well, this is a rather alarming signal. Also yesterday, data on the US trade balance was published (- $ 55.5 billion with a forecast $ 54.0).
Our recommendation is “sell the dollar”. Especially, if you remember Trump's attack on the dollar. Traditionally, in Twitter, the President of the United States called for the devaluation of the dollar.
And about the weak UK business activity data (Composite PMI index went below 50, that is 49.7), which increased the downward pressure on the pound. It’s too late to sell the pound and too early to buy. A similar index was published in Eurozone. The situation there is better (52.2 with the forecast 52.1). So, euro purchasing is not a bad idea ( on the intraday basis).
Ms Lagarde was honored to have been nominated for the ECB presidency. According to experts, Lagarde will adhere to a stimulating monetary policy aimed at ensuring economic growth in Europe. So, the euro might be under pressure.
We expect low liquidity in financial markets due to a holiday in the USA (Fourth of July – Independence Day). The “weak” market may well surprise in the form of volatility explosions, so today it is worth trading with caution.
Our trading recommendations for today: we will continue to look for points for dollar sales as well as the Russian ruble. Since AUDUSD has finished the day with a 0.7020 mark, we do not sell it, duo to further growth. Sell oil. As for gold, today we are working without obvious preferences on the oscillator signals.
