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News background & trading ideas for 12/02/2019

Yesterday can be called a crash day for the pound if one looks at macroeconomic statistics. Everything was literally pretty bad. Industrial production fell (-0.5% m/m - with a forecast of +0.1% m/m), construction decreased (-2.8% m/m with a forecast of +0.1% m/m), the trade balance worsened (-3.229 billion pounds with a forecast -3.000 billion pounds), as well as GDP in December (-0.4% m/m with a forecast of 0% m/m). Eventually, the GDP for the 4th quarter despite turned out to be positive, but in a very slight way, was worse than forecast (+0.2% q/q +1.3% y/y, while the forecast was +0.3% q/q +1.4% y/y). Considering that these were quite basic macroeconomic indicators, under normal conditions, with such a pronounced negative, the pound had to fly down 150-200 points within an hour or two. But in fact, the losses did not exceed 30-40, which, taking into account the general strengthening of the dollar, can be attributed to an error at all. We found such response of the pound as another confirmation of our mid-term recommendation buying the pound while awaiting for the Brexit outcome. The pound has already got an immunity against almost any information excluding news from Brexit fields. And although there is no progress so far, it seems for us as an inevitable scenario. So, we continue to keep mid-term positions on the pound purchases and gradually adding from good points.

The dollar’s increase occurred amid reports that the Democrats and Republicans have tentatively agreed and a threat of the shutdown significantly decreased. Despite such obvious fundamental positive, we are under no immediate pressure to turn over into dollar purchases for one simple reason - the Dollar Index has reached the upper limit of its mid-term range. There isn't much time left for the maximum marks of the last year, and it is somehow absolutely wrong to buy near the key resistance of 97.50. So, we continue to recommend dollar sales, but with short enough stops.

Today we prefer to sell the dollar against the Canadian dollar. The entry point is the area of 1.3300. Stops above 1.3350. Profits 1,3200.

Oil after the breakdown of 53.50 (WTI brand) again looks pretty sales attractive. The profiteers synchronously retooled and prefer sales now. The number of sellers among hedge funds grew by 28% in just a few days. In the short run, we choose not to go against the will of the market, and since the current sentiment coincides with our mid-term position, we, with a calm soul, recommend selling oil within the day. At the same time, given the extremely volatile market sentiment, above 53.70 sales should be covered. As for the goals, a minimum, this is the masses of 50, but in the foreseeable future, we can see 45 and even lower.

Gold yesterday was under quite strong downward pressure. The reason is both the general strengthening of the dollar and the next news about the intensification of the negotiation process between the US and China. So far, we recommend using this decrease as an opportunity and reason for cheaper purchases. The trading plan is unchanged: we buy below 1310, we add around 1295. We put the minimum profits in the area of 1320, and we place the stops below 1290. While the asset is above 1294, we see no threat for long positions. Recall that when it comes to intraday positions, it is desirable to close it at the end of the day.

The news that Moody’s has increased sovereign ratings of the Russian Federation inspired bulls to buy the Russian ruble. To our mind, it generally doesn’t influence the current state of things of the RF economy and its prospects. So again, the current growth of the Russian ruble it is an opportunity, not an issue, a possibility for more expensive sales.