News background and trading ideas for 05/12/2018

5 dic 2018

Let's run through the memorable moments on the financial markets of the latest day. The outcome of the meeting of the Reserve Bank of Australia, which has left the rate unchanged, definitely won’t print in our memory. Much more interesting was the speech of Mark Carney, who once again was frightening with terrible consequences, or rather, he defended the report of the Bank of England, published last week. Let’s remind that according to the Central Bank estimates, the UK exit from the EU without a deal could result in the economy losing 8% of its size during the year, a 10% increase in inflation, etc. Actually, Carney’s goal is clear - to convince Parliamentarians to vote for the deal.

Yesterday Theresa May started a 5-day promoting deal marathon - this is about Brexit debates. Consequently, the pound was very volatile, like up-and-down. In particular, the hike was caused by statements from the EU that Brexit is a reversible process and, in theory, the EU can forget about everything if the UK decides to abandon the idea of leaving the Union. However, optimism quickly changed to pessimism, related to the extremely skeptical attitude of Parliament to the deal.

Such volatility spikes need to use, buying a pound in the area of daily lows and taking gains as the profit reaches 100 +/- points. Time "X" so far falls on December 11th. The next Tuesday is the day of the vote in the Parliament on the agreement with the EU. Up to this time, there will be a lot of up-and-down moves in pound pairs, but the main drift will still be after the vote. Recall, we expect growth of the pound against the dollar up to 1.41-1.43 because we are confident that the treaty will take place. Although, of course, a happy ending may take other, more unusual and surprising forms. So we continue to buy a pair of GBPUSD.

The highlight news of yesterday was no news about the deal between the USA and China. Markets started to wonder about its relevance. China keeps silence. The US officials look lost. In the end, there are nerves once again, sales in the stock market and the USA, currencies of development counties are suffering, as well as the Australian and Canadian dollars.

From the other events, it should be noted the gold growth, as we’ve announced and predicted. The breakdown of resistance 1235 is a very strong technical signal in favor of the further growth of the asset. So we are looking for buy points of the gold.

The oil market is getting ready for OPEC meeting. So it’s better to leave the oil pending and wait for outcomes of the meeting.

Today is interesting first of all for the announcement of the Bank of the Canada decision. The rate will likely remain unchanged. Although comments of the Central Bank promise to be hawkish in the light of G20 meeting, so we keep recommending sales of USDCAD pair.

As for our other positions, we still believe that the dollar should be sold intraday. Although the developments in France are frankly worrisome, therefore it’s better to postpone with purchases of EURUSD pair.