NFP, Trump's obsession, Morgan Stanley's recommendations

5 lug 2019

Getting ready for the NFP, Trump's obsession, recommendations of Morgan Stanley

The financial markets are having a torrid week. Financial market participants are concerned about the appearance of a trend that the market currently is following. The concern is about the statistics based on the US labor market outcome, which in the future might provoke the US economic slowdown.

Let's try to figure out what we should and should not be expected after the outcome will be published. It seems like nobody wants to undertake an in-depth analysis of the current state of the economy and labor market, a matter of reasonable inference from “how the forecast has been calculated”. The formula is, therefore, as follows: take the simple arithmetic average of the NFP index over the last couple of years, that is all. Such an approach practically guarantees that actual data will be different from forecast data. That in itself carries an opportunity for earnings.

NFP report outcome creates adverse expectations. We believe that the 160K figure is too optimistic according to the ADP outcome.

Since we are expecting poor forecast data, our trading recommendation is - sell the dollar. Moreover, the markets are concerned about possible US interventions against the dollar in the foreign exchange market. Recall, Trump supports the dollar devaluation idea. Last time the United States came out with interventions on the foreign exchange market was in 2011.

Recently, USD to YEN rate forecast has been sharply lowered by Morgan Stanley’s analysts: from 108 to 102 at the end of this year and from 98 to 94 at the end of the next year. Motivation - a sharp decline in profitability differential: the profitability of American assets decreases faster than the profitability of European and Japanese. Recall that it is not the first time we recommend selling USDJPY.

As for our other recommendations, we will continue to look for points for sales of the Russian ruble and oil. We are working with gold today with no clear without any preference for oscillator signals.

In addition, we recommend paying attention to USDCAD. The fact is that today, statistics on the labor market of Canada will be published. So in the case of a double positive or double negative, the USDCAD may be subjected to strong pressure (ascending or descending). The best option for trading, in this case, is trading on the news. 1-2 minutes before the news releases, we set pending stop orders in both directions (buy and sell) with 30 pips at that time and wait for the news to come out. Almost certainly the movement will be strong and unidirectional. That will lead to the execution of one of the orders and will make it possible to earn quite quickly without any particular risks.