News background and trading ideas for 24/12/2018

24. Dez. 2018

Our first review of the new week we start with an analysis of the highlight events of the last week, all the more the upcoming one promises to be much boring since it is a holiday period for many parties of the financial markets.

So, the central event of the past week without any doubts was the meeting of the Federal Open Market Committee on Operations. The rate, that's to be expected, was raised, but it was not the main movement. The foremost event - the Central Bank decreased the number of rate hikes in 2019 from 3 to 2 and made it clear that its actions will be directly determined by the outgoing data. This is an obvious signal that the rate hike cycle is coming to an end. Accordingly, the dollar in 2019 will most likely have challenges.

Speaking of data a quite enormous block of the US statistical information was published on Friday. The statistics came out diverse in general. The growth of US GDP in the third quarter was unexpectedly revised downward (instead of 3.5%, the growth was 3.4%). Although the numbers for orders for durable goods turned out to be more unexpected: with the forecast of 1.6%, in fact only 0.8% came out. Despite the University of Michigan Consumer Sentiment Index turned out to be higher than forecast, in general, the picture is not very encouraging. In the sense that the pace of economic activity shows decaying. The indicators are still satisfying, but the dynamics of their changes are disturbing. So, we perceive the strengthening of the dollar on Friday as a kind of pre-holiday irregularity and continue to recommend the sale of the American dollar in the foreign exchange market.

The most assuring pair for dollar sales is rather its pair with the Canadian dollar. The fact is that significant statistics on Canada were released on Friday, which turned out to be higher than expected. In particular, Canada’s GDP rose by 0.3% in October (experts expected growth of 0.2%). The main negative for the Canadian dollar is the continued drop in oil prices, but Canada is not Russia. The structure of the economy is radically opposed, so that, in our opinion, the fundamental positive outweighs the negative. Therefore, we recommend selling USDCAD, and in terms of a conditional hedge, you can simultaneously sell the oil.

Do not either forget to sell the Russian ruble, which has literally collapsed up to the end of the year.

Today in terms of macroeconomic statistics and relevant events promises to be incredibly uneventful, so nothing can interfere to work out our trading ideas.

Let’s remind that besides mentioned above our trading positions, we buy as well the British pound and gold.