Data helps the dollar, optimism in financial markets

6 nov 2019

In our previous review, we noted that the publication of the ISM index of business activity in the US services sector will be the main event. The ISM index of business activity in the services sector reached 54.7 in October (analysts expected 53.5, before 52.6).

As a result, the USD strengthened. “I think it’s a good time though to pause...and that’s what I am looking to do,” Barkin (non voter)told reporters following a speech to an economic outlook conference in Baltimore was another impulse. It seems that the majority of the Fed feels that way. According to the Chicago Mercantile Exchange, markets also expect a pause until September 2019, the probability that the rate will remain at the level of 1.50% -1.75% exceeds 50%.

As for the USD, Tuesday turned out to be rich in bullish signals. Despite this and yesterday’s growth, we do believe that the potential for its further strengthening is limited. Therefore, we will continue to look for points for its sales across the entire spectrum of the foreign exchange market, both on the intraday basis and the medium term.

China deal is likely to be signed in November so markets are optimistic about that. The confidence that by the end of this month we will see the first signed agreement is getting stronger, so safe-haven assets weaken and commodity markets grow.

Take oil, for example. OPEC sees its oil market share shrinking, Forecasts are generally negative for oil prices - the Cartel expects a significant decrease in oil demand growth in the foreseeable future. However, oil strengthened yesterday at the end of the day - expectations of progress in trade negotiations overcame fears of a surplus in the oil market. So our recommendation to buy oil on the intraday basis remains relevant.

As for the safe-haven assets, the downward pressure is increasing, and they are close to hitting the critical points, after that the further reduction in the price of gold and the Japanese yen is quite possible. On the other hand, their current prices look ideal for purchases. So today we will buy gold and the Japanese yen with small stops.

Today, in terms of macroeconomic statistics, we are waiting for statistics from the Eurozone (a lot of business activity indices, as well as retail sales data) to come out.