News background & trading ideas for 06/02/2019

6 feb 2019

As far as macroeconomic statistics, yesterday was almost like Monday: once again weak data from the Eurozone, and unconvincing statistics from the UK. Retail sales in the Eurozone fell by 1.6% (however, this was in line with forecasts), PMI in the service sector came out below forecasts, and the equivalent figure in France was at all below 50, that is, signaling a decrease in economic activity. In the UK, the Composite PMI, released although more than 50, it still turned out to be lower than expected: 50.3 with the forecast of 51.4.

As a result, both the pound and euro were under pressure. But it didn’t bring up the massive sales: firstly, the news was off-the-rack, secondly, do not miss that fact that the dollar has its dissenting opinion.

Before turning to the United States news, we’ll give one more reason to defend our position to buy the British pound. In the options market, the cost of protection against price volatility of the pound sterling fell to almost a three-month low (implied volatility decreased to 10.8% from the 15% mark recorded last November). That is, traders do not expect a sharp drop in the pound.

But let’s back to the US news. Yesterday investors very carefully were working with the dollar, waiting for Trump’s speech in Congress. And they had a point: a declaration of the state of emergency was a possible scenario. Everything ended without that, but Trump’s rhetoric wasn’t peaceful in any way. Trump strongly blamed Dems and promised to build the wall whatever it takes for him. So, there is every indication that in 10 days we will get another shut-down.

Accordingly, despite the current dollar’s success we continue looking for points for purchases of the greenback in the foreign exchange market. Today the reason for its decline could be data on the US trade balance. Recall, that precisely the trade gap is the Achilles heel of the United States economy.

On the fronts of commodity markets without much changes. Recall our intraday recommendations this week: purchases of gold and oil. Although we note that oil again tries to go below 53.50. For us, this is a watershed line - below this mark we turn over into sales.

The parameters of the trade plan for gold have not changed. You can buy from the current with adding in the area of 1295 and stops below 1290. At the same time, profits can be placed up to 1350.

Sales of the USDJPY pair look pretty good. You can try it in the area of 110 with stops above 110.30 and profits below 109.
Mid-term sales of the EURJPY pair look quite interesting either. You can sell around 125.70-80 with stops above 127.20 and profits below 124 or even lower if you have enough strength to keep longer.