News background and trading ideas for 14/01/2019

14. Jan. 2019

The ongoing week promises to be highly rich and interesting in the pound’s pairs, besides the markets will be waiting for a solution of the US shutdown issue as well as the outcome of negotiations between the USA and China.

But let’s refresh in our memories what interesting happened last week before we begin to talk about the ongoing events.

Firstly, probably, the continuation of blocking of the financial government structures in the USA. 800 00 officials did not get paid, and this shutdown will be remembered as the longest one. Trump, meanwhile, threatens with a state of emergency in the country on purpose to get access to the military assets and with its help to build the border wall with Mexico. We continue to watch and still recommend the dollar sales.

Another significant event of the past week became an appearance and information dissemination that the Brexit may be deferred. Initially, this news getting out in The Telegraph with reference to three officials in the EU, then it was already more officially confirmed by Austrian Chancellor Sebastian Kurtz, and on Friday there were already talks of this in the Cabinet of Ministers of Great Britain. On the eve of the vote on the current agreement between the EU and the UK, January 15, this is very positive news for the pound. Since the failure of the vote (and this is the most likely development of events on Tuesday) will not mean the end of the world, but only the start of a new round of discussions between the UK and the EU. Recall, we have voiced the idea that the parties will agree and there will be no way out without a deal since September. This indicates that the current prices of the pound, which depends on the particular option, are wrong. The pound is hugely undervalued and worth buying.

The oil market last week also marked a micro-record, has shown the most aggressive weekly rise in 2 years. The reasons are expectations of a prosperous conclusion of negotiations between the US and China, as well as OPEC+ implementation of the agreement (for a number of indirect signs, the Cartel indeed reduced oil production). Despite such a positive week for oil, we still do not see strategic causes for its purchases: the world economy is slowing down, which means that the increase in demand for oil is slowing too, while the United States, Russia, and Saudi Arabia produce at maximum highs. So we continue to recommend mid-term oil sales. And considering that the asset entered the dense zone of resistance, this week we recommend as well selling oil within the day.

Among others our ideas the feasibility of the Russian ruble sales should be noted, as well as purchases of Japanese yen and gold both as mid-term and intraday.