News background and trading ideas for 03/12/2018

3 déc. 2018

The last couple of weeks although were considerably volatile for the financial markets, by and large, little has been essentially changed in the fundamental background. As a result, last week the markets at all focused on fortune-telling on the coffee grounds, trying to predict the future of the Fed's monetary policy, based on the words of Fed Chairman Jerome Powell, or from the contents of the minutes of the last FOMC meeting.

The forthcoming week promises to be more than busy, but super intense. Here is just a short list of upcoming major events of the week: statistics on the US labor market (and in particular NFP data), decision on the interest rate of the Central Banks of Canada and Australia, voting in the British Parliament regarding Brexit (approval of the agreement between the UK and the EU), OPEC meeting, Eurozone GDP and much more.

The week has been already marked by a milestone before it even began. Donald Trump and Xi Jinping on G20 meeting have agreed to suspend the trade war between the US and China and no longer increase import tariffs. Since there is an agreement on this the additional duties on Chinese goods imported into the United States will be frozen at 10% for 90 days. In exchange, the Celestial Empire undertakes to "immediately" reducing of the trade imbalance between the two countries and import from the United States a "serious" amount of agricultural, industrial and other goods, as well as energy.

Volatility explosions are almost unavoidable considering the abundance of significant events in the week so for nervous traders and lovers of increased risks, this week would better to take a break and watch what happens. But on the other hand, these are such weeks that provide excellent trading opportunities. In the course of the week, we will, whenever possible, give assessments of one or another event and analyze the options for the reaction of markets.

Let’s remind our core trading positions so far, with which we start the new week either.

The best agreement of autumn has not yet become one, but it has a chance to rehabilitate itself and become the best treaty of winter. Or rather December, since everything is supposed to end if not this week, then next. It's about the pound purchases. We have been handling this deal for several months and finally came close to a resolution. We cited it motivation more than once or twice. We only recall that, according to our estimates, the removal of uncertainty around Brexit (in a positive way) can lead to an increase in the pound against the dollar in the area of 1.41-1.43.

It seems to us the dollar is on a top now, despite the confident Friday’s closure, which means it needs to be sold. Accordingly, we continue to recommend sales of USDJPY and USDCAD pairs, as well as purchases of EURUSD and GBPUSD.

Intraday purchases of the gold are keeping to remain relevant despite that the trading hatchet is buried.

As for oil sales, we strategically continue to stick to this position, but tactically, in the light of the results of the US-China meeting, as well as the upcoming OPEC meeting, we would recommend temporarily fix profits in sales and wait for the outcome of the OPEC meeting. About a year ago, such a meeting ended with a rise in oil prices by almost 2 times.

Sales of the Russian ruble look more predictable in this term. It owes the oil about 20-30% of the cost (it is understood as the temporary unwillingness of the ruble to work out the oil fall).