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Displaying results for week of Nov 04, 2018الفضة: فنيات و أساسيات
هل ستكسر الفضة أخيراً فوق حاجز 15.00 دولار لتجد 16.00 دولار أم أنها ستستمر في التماسك حول 14.50؟
Why USD Rallied on Fed Stmt
The FOMC statement changed almost nothing and yet the US dollar climbed in the aftermath, we look at why. Since the start of the Friday FX trading session (as of 10 pm London last night), the US dollar is up against all currencies, with the exception from the JPY and CHF. The euro is weaker after Draghi made a slight dovish shift on Thursday. UK Q3 GDP grew to 1.5% y/y as expected from 1.2% in Q2. US Oct PPI is up next. A new EUR trade was issued ahead of yesterday's Fed statement and a new Index trade has been issued today, abcked by 3 charts & 3 technical reasons.
The only changes in the FOMC statement were an indication stating that business investment had moderated from a strong pace earlier in the year. Previously it was characterized as strong. Yet the US dollar climbed 20-50 pips across the board in the aftermath. Some of that might have been USD flows that were restrained until after the dust settled but the move was also about monetary policy.
FIRST: Heightened certainty of a December rate hike. There was some speculation that the Fed might want to keep its options open after the October drop in stock markets and the 20% fall in oil prices. Instead, they continued to categorize growth and employment as strong.
SECOND: Over the longer term, the Fed debate shifted to what will happen in 2019. Considering expectations of a tapering in fiscal policy after the Republicans' loss of the House, economist expectations range from one hike to four hikes. If the Fed intends to slow the pace early in 2019, now would have been a good time to offer a hint. By maintaining the upbeat tone, that's an endorsement of the current pace and a tailwind for the dollar.
Contrarily, Draghi took a small step towards something more dovish. Speaking in Irish parliament he said that the ECB could push out forward guidance if growth disappoints. That's a hypothetical and is stating the obvious to some degree but it's a crack in the door and economic data has clearly disappointed lately.
Chartwise, Ashraf suggests that 10-year yields are heading down towards 3.13% to form a right shoulder support (as part of an inverted H&S formation), before pulling back up into the Santa Rally. This could mean a bounce for the VIX from 16 to 22, implying fresh downside for equities.
Markets Cheer Expected Elections Outcome
Risk trades are higher after Democrats regained control of the House in a vote that tracked close to what polls were expecting. Kiwi is the highest performer after a solid jobs reports ahead of the RBNZ decision. EURUSD is attempting to close the day above 1.1440 to make it above the Sep 24 trendline resistance. The DOW30 was stopped out and the EURUSD long was closed for 145 pip-gain. A special note was issued on EURUSD post-elections & pre-Fed.
There was no major surprise in the US midterms. Democrats won a dozen-seat majority in the House which is slightly less than forecast. Republicans did better in the Senate, expanding their majority and winning a pair of very tight races. Overall, Republicans did a bit better than expected but there were no surprises and the balance of power has tilted back towards gridlock.
So what's behind the surge in indices? As we wrote before the vote, elections are by definition uncertain events and increasingly emotional events. Almost any result would have led to a sigh of relief to some extent. This means that further tax cuts are less likely in the US but it's also a check on the President's trade war and some of his darker impulses. The S&P 500 opened 21 points higher and is now up 42 pts. DOW30 is up 358 pts, above its 55-DMA for the 1st time since Oct 10.
Looking ahead the RBNZ is largely expected to leave rates at 1.75% .The currency jumped after the unemployment rate dropped to 3.9% from 4.5% earlier today. That's the lowest in 10 years and could be a game changer for the central bank. The drop in unemployment came despite a 0.2 pp rise in participation. Wages also jumped 1.4% q/q compared to 0.8% expected. NZD/USD has rebounded nicely from a test of the 2015/16 lows in the past six weeks but is still 500 pips below April levels. A shift from the RBNZ and continued USD selling could help to close that gap.
The Mid-Term Dilemma
Americans head to the polls late on Tuesday in a vote that could lead to another deadlock in Congress but how the market will react isn't entirely clear. The British pound is the top performer for the 2nd consecutive day, while the loonie is the only loser against the greenback. The video for Premium subscribers previewing the various elections scenarios is posted below.
Rules of Thumb?
There are generally two rules of thumb for traders during elections: i) the stakes are overstated generally and in the aftermath of most votes the anxiety recedes and depressed assets tend to recover; ii) the immediate reaction rarely lasts (remember what happened immediately after Trump's victory was announced). Traders aiming to capitalize on volatility emerging on what are believed to be the exit polls or first round of official results will need to be swift in squaring/closing positions. Most importantly, remember to stay relatively smallThe US midterm elections are primarily about the House of Representatives, with polls giving Democrats around a 70% chance of taking it back; which would give them an effective veto over major US legislation. That would result in a deadlock and a series of investigations that would undoubtedly infuriate Trump and further divide the US. Still, every election seems like a potential disaster in the leadup and businesses tend to get along just fine anyway, so risk assets and US stocks in particular are expected to rebound in time regardless of the result.
Yet rules of thumb don't always work. Italy earlier this year is a good example. The MIB index initially climbed 9% in the eight weeks after the election but has fallen 20% since.
Beware of November 2016 Moment
What's especially top-of-mind on the US vote is the results of the 2016 presidential election. US futures initially crumbled on the shock of Trump's win only to begin a turn the next day and an epic run for months ahead. Some said the reason to the subsequent rebound was the Trump's acceptance speech, which was surprisingly more concilatory and less divisive. By the same token, traders must watch not only the results, which will trickle from 5 am til 8 am GMT/London, but also the response (speeches) from the new majority/minority leaders in both chambers of Congress.Could market participants anticipate a similar playbook? If that is so, then a Republicans win would trigger an immediate rally in stocks and selloff in the yen, and potential disappointment if they don't. Fundamentally, Trump is promising another tax cut so there's some underpinning, even if that promise rings hollow given the deficit concerns.
On the other hand, Democrats holding the House are much more likely to curb a trade war, which could also be good for markets. As for the US dollar, a Democrat win in the House would certainly curb Trump's ability to goose growth and that uncertainty is likely to weigh on the US dollar, especially if it means more aggressive trade policies since these are not the subject of Congressional approval.
While it's tempting to project certainty, the trade may be to chase the momentum once the dust settles. We will also be listening carefully to the responses from Trump, Democrats and Republicans to see if there's an indication of a willingness to work together.
تأثير الانتخابات النصفية الأمريكية على الأسواق
غدًا يوم الثلاثاء، ستتاح للجمهور الأمريكي فرصة تغيير توازن القوى الحزبية داخل الكونجرس الأمريكي، الذي يتكون من مجلس الشيوخ ومجلس النواب. يسيطر الحزب الجمهوري على البيت الأبيض ومجلس الشيوخ ومجلس النواب حالياً. السؤال الكبير هو: هل فعلا ستؤدي “الموجة الزرقاء” من الديمقراطيين الغاضبين إلى استعادة السيطرة على مجلس النواب؟ التحليل الكامل
GBP up on Brexit Deal
One day before the much anticipated US midterm elections, here are some thoughts about sterling. Yes, GBP. Today is another day when GBP is the hoghest performing currency in the G10. UK PM Theresa May could be on the verge of clinching a Brexit deal that she could get through parliament, according to reports over the weekend. Cable climbed by as much as a full cent to 1.3065 at the open but has pared back on denials. CFTC positioning data showed rising GBP shorts, many who are undoubtedly nervous as we start the week. A new Index trade was posted on Friday.
The London Times reported on a secret Brexit deal, citing cabinet sources. They say the EU will write an all-UK clause into the withdrawal agreement that means a Northern Irish backstop will not be needed and that at the same time, May is on track to secure a Canada-style free trade agreement.
There is increasing chatter that May will present the deal to cabinet on Tuesday with an ultimatum to either support it, or quit cabinet. That could be a high stakes moment but the sketchy details revealed so far sound like they meet the demands of euroskeptics, the DUP and Conservatives who don't really want to leave the EU.
Naturally there are denials and conflicting reports and that weighed on GBP after the initial pop. One says Raab still wants an Irish backstop deal and another says the Times report is wrong.
The headlines and counter-headlines were similar on Friday as a report about a US-China trade ceasefire was later denied. Expect these kinds of deal-or-no-deal headlines to dominate in the months ahead, if not years.
Such price swings leave traders constantly vulnerable to headline risk. But at the same time, the bulk of the underlying market moves in the past year are still dominated by fundamentals. What skews the perception is the volume of headlines from something like the Trump-Xi meeting will be an order of magnitude bigger than a CPI report or central bank meeting; yet those fundamental news events will have more of a long-lasting effect on the currency. That's a paradigm we will keep in mind in the months ahead.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.EUR -33K vs -31K prior GBP -52K vs -47K prior JPY -92K vs 93K prior CHF -17K vs -13K prior CAD -10K vs -7K prior AUD -70K vs -70K prior NZD -35K vs -33K prior
The bulk of the moves were negligible but there was some trend towards heavier USD buying in general. Cable shorts also got a bit more crowded.