News background and trade ideas on 25.09.2018

25 sept. 2018

From the point of view of the fundamental background previous day was like thunder for the British pound. Which, moreover, you can’t say, regarding the chart of its price:
GBPUSD 0.26% rose, and during the day the growth exceeded 0.5%. From our point of view, this is a very interesting and symptomatic fact, which confirms our basic idea of a significant undervaluation of the British currency.

Briefly about the current fundamental background. Last week ended with a high-profile failure in the negotiation process on Brexit (our comments on this issue see in yesterday's review). But this is not the end of the trouble, but only became worse. Theresa May and her plan were attacked from all sides, both opponents and their own. This is an alternative plan for Brexit, which is being developed by members of the governing party.

As for the opposition, they have knocked at the new referendum on the issue of Brexit at all. In addition, the issue of regular early elections was on the agenda. As you can see, at first glance, everything is extremely bad for the pound. But if you look at the situation deeper, in fact, most of these events play into the pound's hand. Actually, this is evident from its yesterday's dynamics.

In total, we continue to monitor what is happening in the UK. Despite the current negative, we still stick to the pound buying line (for detailed reasons for our position, see previous reviews).
Trade Wars are going on, but quite remarkable against this background was the increase in oil to the maximum values from 2014 (a formal excuse - a signal from OPEC that they will not hurry to increase supply). Which leads us to a long-term trading idea - the sale of oil.
Yes, oil is still raising; yes, analysts are reviewing massively oil forecasts regarding its price rally (here, considers a $100 per barrel point); yes, Venezuela has eliminated from the oil market 1 million barrels per day; yes, Iran is still under sanctions and can possibly eliminate additional 1-1,5 million of barrels per day. There are also many other factors of such oil price rally. However, in a long-term prospect, such factors cannot guarantee stable oil’s rally. No visible sign could launch another commodity supercycle (India cannot be considered as a key player). Overall, the world is changing in terms of Energy's consumption structure and nature, and its sources. And those changes are not favorable for oil. That means, globally oil is doomed for a reversal and reduction. So that is why our main strategy - is to sell it. Start selling it now, while the market is still hot.
Among other trading ideas, the recommendations to sell Russian ruble and Japanese Yen against the dollar are still relevant.
In terms of fundamental plans - this day is expected to be quiet. Markets continue to await the FOMC decision. It should be reminded, our position - is to find points for dollar’s buys (more details, you can see in our reviews regarding the upcoming Fed decision).