All eyes on OPEC – Wednesday is open season

everyonestaring

There may be nothing more important in the markets this week than Wednesday’s day-long OPEC meeting in Vienna. Approximately 40% of the world’s oil supply comes from OPEC nations and when they decide to change levels of production manipulate the markets (cough) it sends shockwaves through markets and currencies around the world.

OPEC members 2016
OPEC members 2016
Brent Oil
Things could get interesting on Wednesday..

Couple this with the usual weekly shenanigans of the US Crude Oil Inventories at 3.30pm and you’ve got a doozy of a day.  Currencies in every major pair can expect to feel the effect of news from OPEC’s meetings. OPEC doesn’t allow the press in to their meetings, but officials come out and talk to them regularly. Get in your supplies, pre-order your take-away, and settle in for a fun day in TIQL.

Where is the sun rising in the markets?

On Thursday 24th the dollar almost hit a 14-year high in an unexpected swell of support for the currency. Yellen has strongly indicated a rate rise, and Trump is reinforcing his intentions to rip up the rule books when it comes to international trade – saying sayonara to the TPP. And currency traders can’t seem to get enough.

US traders stayed away over Thanksgiving, so there were fewer players on the field meaning each trader’s actions were worth more at the end of the week. That said, there’s no indication that Monday will cause a change of heart when US traders are back at their desks. So the dollar trend looks to continue, but how does that affect China and currencies on the other side of the globe?

The signs are there that Trump’s rhetoric could ultimately help China on its way to being the number one powerhouse in world economic terms. Analysts suggests that if the dollar’s international standing diminishes once Trump starts controversially dismantling international trade policies in the new year, China could step into the breech. But in the short term, the Yuan is looking at an 8-year low. Things are really not looking good for emerging currencies in the current US-focused climate.  China reveals two key manufacturing figures on Thursday at 1am and 1.45am respectively but the markets seem cautious and I wouldn’t hold my breath for much of an upswing.

AUDUSD and Trump
AUDUSD has reacted on any news from Trump

AUD doesn’t often do well when markets are in turmoil and it’s rollercoaster since Trump’s surprise election was only to be expected. Traders will be looking to Thursday’s Private Capital Expenditure quarterly figures at 12.30am GMT for a glimmer of hope. The previous quarters have been low at -5.2% and -5.4%, but predictions are positive with a rise to -2.8% on the cards. A leading indicator of economic health, they could boost last week’s limp rally against USD. Surprisingly, Australian retail sales, released on Friday at 12.30am GMT, have been consistently more positive than expert estimates since October. This may indicate an underlying belief in the currency that may go some way to explain its trend-bucking upswing over the last week. With US traders back in the office on Monday, things may go against the AUD at the start of the week, but if Private Capital Expenditure is finally up, and domestic Retail Sales come in as stronger than expected for the third month in a row on Friday traders may be more likely to back AUD as the week finishes.

This week it looks as though the sun rises in the West, but it may set in the East.

3 major currencies 1 risk sandwich

Tiql traders and currency traders in general can look forward to a volatile week in the markets for the Euro, pound sterling, and US dollar. Roll up your sleeves and get stuck in.

A heart attack sandwich like this week's action
A heart attack sandwich – like this week’s action

President Draghi speaks twice this week. First up, to give the markets a gentle rattle on a Monday morning, at 2pm GMT he’s talking to the European Parliament about his predictions for the economic effects of Brexit. GBP traders would also do well to pay attention. He is likely to play up negative consequences for Great Britain while downplaying risks for the Euro.

Next, he hits the University of Deusto Business School in Madrid to talk about the future of Europe on Wednesday at 12.30pm. We can expect more than a few bumps in the road for the EUR and GBP during this Draghi speech.

Also on Wednesday at 7am, before London markets open, GBP could take a battering again as the Bank Stress Test Results are revealed. Don’t forget it was these guys whose over-lending led to the global meltdown of 2008 so traders will be interested. But memories are short, and markets like profits so how much will they really care about something that’s starting to look like a PR exercise. Traders may well be like

unimpressed via GIPHY

Then, on Friday at 1.30pm to send everything into a tail spin, but especially the dollar, is Non-Farm Employment Change. Far below its July peak of 287K this has hovered around a respectable 160K for the last quarter. Analysts predict a rise to 165K, which markets won’t like. Bear in mind the Trump effect when thinking about any dollar plays this week. His unpredictability could change everything.

trump_flicker_face_yess
What is he about to say next?

GBP Autumn Speech and GDP

Sterling has been on quite a ride in recent weeks, but it doesn’t look like calmer waters are ahead.

hammond

This week the Brit’s Chancellor of the Exchequer, Philip Hammond, delivers his annual update on the Budget on Wednesday at 12.30pm GMT (tbc) and it may well differ from ones his predecessors have given. Rather a lot has happened since the Budget earlier in the year, and we could reasonably expect Hammond to produce a few surprises. Comments he makes on the health of the economy will be devoured by the markets and he has already ditched promises to avoid spending made by Osborne so the government may finally start reaching into its pockets. If big spending plans are announced, the markets are not likely to react positively.

The GBP journey is going to roll a little longer than the dollar this week. After all, why would the Brits take a holiday to celebrate the States breaking away? Actually, if someone suggested that now, it may go down quite well. But in market terms, another doozie is waiting for the pound on Friday. Keep your eyes and ears open for reactions to Second Estimate GDP quarterly results at 9.30am GMT. Taking a look through the previous estimates and planning your in and out points could net you some fun and games with the pound around these events this week.

Euro elections may mean market turmoil

Brexit caused mayhem and Trump’s shock election resulted in a massive bump in the road for the dollar.

bump-in-the-road

Politics can send unpredictable waves through the markets and there is more to come. Today’s spanner in the works is French President Sarkosy who has bowed out in his party’s presidential primary. As France is a major power in Europe, Euro trading will react. To pour oil on troubled water, Italy is holding a key referendum on 4th December. Political instability is nothing new in the country, but this vote could mean rewriting the Italian political structure and bringing in stability. Sounds good, but the reality is that it’s turning into a vote of confidence in the Prime Minister with anti-Euro sentiment sitting heavily in the No camp. After Britain’s referendum, many will see this as a vote about the EU and the Euro could take a ride.

Also in the news is Angela Merkel, German Chancellor and de-facto leader of Europe. Germany will hold elections next year and she has just announced plans to stand for re-election. Her success, or lack of it, will have a major impact on the success of the European project and its currency. So rocky roads ahead for the Euro, and that means opportunities abound for TIQL players. If the Euro is not something you currently trade, now might be the time to start watching and researching the EURUSD pair. There may be trouble ahead.

Giving thanks on the USD

ap-philadelphia-thanksgiving-parade-matt-rourke-940x540

Thursday 24th brings Thanksgiving and traders in the States will be taking a break as US markets close for the day. Followed by Black Friday, the retail weathervane of the season, and USD trading effectively finishes on 23rd this week so Wednesday is crammed with red flag events.

An optimistic Core Durable Goods is up first with analysts expecting a small rise from 0.1% to 0.2%. At the same time a less rosy Unemployment Claims will be announced and that also looks set to rise. Not such good news. Both at 8.30am GMT.

At 10.30am GMT Crude Oil Inventories will take the markets for a ride. Notoriously unpredictable, industry mutterings about overproduction haven’t stopped prices rising. It’s looking bullish and the next sticky zone is around $50.

A chart of the Brent Oil contract
Brent Oil has been climbing but it may get sticky

anticipation via GIPHY

GBPUSD chart
We might see a test of the half way back post FOMC

 

 

 

 

 

The big news of the week for USD though is the FOMC Meeting Minutes at 2pm GMT. There have been strong indications that Yellen is going to raise rates in December and traders will be agog to hear the discussions of the last meeting to see if that is reinforced or weakened.

USD week ahead 14th Nov

Softly, softly seems to be the market attitude to the dollar at the start of the week. Everyone is waiting to see what happens.

via GIPHY

With none of the usual impactful events until midweek, traders will be reacting to political news across Monday and Tuesday. POTUS-elect Trump’s attitude to all matters economical suggest a retreat from the free-trade attitude that has prevailed. This has lead analysts to bet that inflation will rise and so too interest rates. This makes the market-moving event of the week Yellen’s testimony to the Joint Economic Committee on Thursday at 10.00am GMT. She will give evidence about the economic outlook with a prepared text followed by a Q&A session. Expect major market ructions.

Leading up to Thursday we have domestically-focused events for the dollar.

  • 8.30am GMT Tuesday Core Retail Sales and Retail Sales
  • 8.30am GMT Wednesday Producer Price Index
  • 8.30am GMT Thursday Building Permits, Consumer Price Index and Core CPI, Philly Fed Manufacturing Index and Unemployment Claims

No change is expected for the retail announcements or the PPI so the market effect will be neutral or positive on Tuesday and Wednesday though the Crude Oil Inventories will dampen enthusiasm if it drops as expected at 10.30am GMT Wednesday.

Minimal changes are on the cards for Thursday’s events in the run up to Yellen’s testimony, but whatever way the general trend goes – up or down – is likely to affect traders’ attitudes as they  get ready for 10am GMT. Then it’s all systems go.

via GIPHY

It is anyone’s guess whether or not traders will finish the week feeling as positive as they do about the dollar right now so the markets are going to be a rollercoaster. And that’s the way we like it at TIQL.

There may be bears in AUD

The AUDUSD pair
The AUDUSD is near support and the 200 SMA

The Trump effect has swept the globe and knocked some currencies for six – the Aussie dollar being one of the most significant of them. This week brings more brow-furrowing events that we think will cause movement in the AUD/USD pair. But everything will be in the context of announcements from POTUS elect Trump’s corner and analysts indicate things are looking decidedly bearish Down Under.

upswing-bull-bear

Monday 14th 8.30pm GMT
The Monetary Policy Meeting Minutes for the Reserve Bank of Australia are released two weeks after cash rate was announced. The minutes explain the committee’s rationale and gives traders clues to the future direction of interest rates for the currency. However, things have changed somewhat so the impact may be more muted than usual.

Tuesday 15th 3.15am GMT
RBA Governor Philip Lowe speaks at the Committee for Economic Development of Australia Annual Dinner. Still new in the post this is his third big speech and, with the recent global economic shake up, traders will be paying very close attention. AUD loses out when things are rocky and he’s the man in charge of interest rates, so he will be likely to try and reassure and stabilise market sentiment.

And then she said they'd chosen Trump!
And then she said they’d chosen Trump!

Wednesday 16th 7.30pm GMT
Australian Employment Change figures will be released. Last month saw a shock drop of -9.8K against the predicted 15.2K rise. This month analysts suggest a significant rise of 20.3K. At the same time the Unemployment Rate will be announced. A slight increase to 5.7% is expected. Positivity in these events may give events a little bump but they’re not going to derail the general momentum if Trump’s policies become clearer.

Players in the AUD markets should also pay close attention to any new Trump announcements across the week as policies that negatively affect free trade and emerging economies may well cool things down for the Aussie dollar.

Where do traders go when the world’s gone mad?

Sometimes we just know the markets are going to be volatile and that’s exactly what we want. Smart players made significant gains during Brexit and the US election by predicting the currency and stock market nose-dives. But if you want to play and your usual markets are giving you the jitters, where can you go to find a more reliable return, a safe haven, a port in the storm?

 

You could do worse than turn to gold. When the markets are spooked, it usually rises. Many see it as a reliable investment over the longer term so short-term uncertainty can boost prices even if they sink back in the medium-term. Gold rose nearly 5 percent to $1,337.40 on Wednesday, its highest in six weeks. This short-term increase can give TIQL players an opportunity to cash in as long as they’re ready to jump out again if the mood changes as it did after Trump’s speech when prices fell back fairly rapidly as the dollar rose.

gold-week

Another investment vying for the title of safe haven is the bitcoin. Though there is still some disagreement about its status, recent events give credence to the fact that it’s becoming healthy competition for gold. This gives investors a chance to cast their nets a little wider and spread their risk in uncertain times. Look at the chart for election week. The bump may have settled down but there was a massive opportunity for gains midweek. Notice the opposite patterns in bitcoin and the dollar index around Wednesday. This all adds grist to the case for bitcoin’s safe haven status and may be something you should have up your sleeve when the dollar next bucks expectations.

coindesk-bpi-chart dollar-index-xhart-111116