News background and trading ideas for 08/11/2018

8 de nov. de 2018

Yesterday markets were focused on the results of the US midterm elections, as well as the calculations of possible consequences of its. Recall, the House of Representatives is under Democrats’ control now, while the Senate is still in the Republicans’ hands. And although the current situation became complicated for Trump, things could be worse.

Naturally, the dollar was under a pressure. Such results still may put paid to the future of Trump’s tax reform and considerably cut his others overtures like the building of the border wall with Mexico. Nevertheless, do not hurry writing off the dollar. Already today Fed will release its another decision on the parameters of the monetary policy. And there is almost no chance for the rate hike instead (at least, the current probability that the rate will remain unchanged is about 95%), the Fed may well once again to lend a helping hand to the dollar. To do this, they only need to continue to radiate confidence in the future at a press conference following the announcement of the FOMC decision (and there is enough reason for that - inflation is growing, and the economy is in excellent shape, which, in essence, emboldened the Central Bank in terms of further rates increase) and confirm market expectations that the rate will rise in December (the current probability of this event is almost 80%).

So while we have to work carefully with a dollar, but, specifically, today the dollar purchases can justify itself. Talking about uncertainty and insecurity of markets, let’s remind about our other current recommendation - looking for points to buying a gold up until its still above 1210. Recently, in the last two weeks, this strategy has completely justified itself.

One of the few pairs in which we would not recommend buying a dollar is a pair of GBPUSD. The pound has clearly, gained momentum and this should be used to buy it.

Returning to the issue of the possible consequences of the US elections, it cannot but be noted that the probability of enhanced sanctions pressure against Russia has increased. And this, in our opinion, is an excellent cause for sales of the Russian ruble to those who have not done it yet.

Do not forget either to sell the oil, although we should be more careful - the rumors about a possible new agreement by OPEC+ on reducing oil production have been drafted on the market. Nevertheless, so far oil reserves in the USA (both according to data from API and official statistics) have increased for the seventh week in a row (almost 8 million barrels based on data from API and almost 6 million barrels due to official data). Oil production in the United States also soared (by 400 b/d) and reached 11.6 million b/d. This means there is a surplus of oil on the market and its sales remain relevant.