World war and dollar, useless bitcoin and plans for the week

3 giu 2019

Day by day the situation with a trade war is getting worse. On Friday, for example, the Mexican peso showed the strongest drop in the last seven months after the announcement of the introduction of new US duties on Mexican goods in response to the flow of illegal immigrants. It was a surprise to the markets since the agreement between the USA, Mexico and Canada did not provide for such a development of events. From June 10, duties on imports from Mexico will be 5%. But this is not the worst. If Mexico could not solve the problem of illegal immigrants, duties will gradually increase until they reach 25% by October.

Interestingly enough how the US dollar reacted to this news, which has declined significantly in the foreign exchange market against major currencies. One of the reasons for this was the revision of the market expectations of the Fed. Last week, we already noted that markets tend toward two or even three rate cuts by the end of 2019. So, after hitting Mexico, markets began to incorporate the option in which the rate would be reduced 4 (!) Times. The chance is extremely small (for now) - only 4%. But the trend is the key thing, that plays exclusively against the dollar. Our recommendation on working with the dollar for this week in the light of such events remains unchanged, we only strengthened in our desire to sell the dollar.

On Friday, Canadian GDP data was published. GDP growth was + 0.5% m / m and + 1.4% y / y when the forecast was + 0.4% m / m and + 1.2% y / y. Only events around Mexico (which call into question the fate of the USMCA, have kept it from growing but despite it, this is decently a signal in favor of buying the Canadian dollar.

Last week, the Bitcoin price rose above $ 9,000, which again grew up chatter about the prospects of its growth. We found Chainalysis Inc., information interesting, according to which only 1.3% of Bitcoin operations were carried out with the aim of serving trade and commercial activity. That says that practically ALL operations with cryptocurrency are purely speculative in its nature (90% of Bitcoin operations are exchange transactions on different exchanges). In this regard, we recall our position - any growth of Bitcoin is a reason for its sales. Current prices are the best for this.

The upcoming week promises to be difficult. Their decisions on the parameters of monetary policy will announce the Reserve Bank of Australia and the ECB, and the US will announce statistics on the labor market at the end of the week.

Our positions for today and the week as a whole are following: we will look for points for buying of the euro and the pound against the US dollar, sales of oil and the Russian ruble, as well as buying of gold and the Japanese yen. In addition, quite interesting, in our opinion, is buying of the Canadian dollar against the US dollar.