Last week results & immediate plans

١٦ ديسمبر ٢٠١٩

The markets finally went out of “hibernation” so we could observe fluctuation not by 40-50 pips, but by 100+ (well, or 400, as is the case with the pound on Friday).

Last week began with Trump's tweet about the successful completion of the first phase of negotiations with China. Recall, on December 15, the United States threatened to introduce additional tariffs on goods from China in the amount of $ 160 billion, which kept the markets in suspense. According to Fox Business, Washington and Beijing completed the "first phase" of the trade transaction, but its terms may not be publicized at all.

Formally, this is an occasion for optimism and the start of sales in safe-haven assets. Nevertheless, we consider the current equilibrium to be extremely fragile and continue to look for points to buy yen and gold on the intraday basis.

Then there was a meeting of the Fed, which showed that the US Central Bank is serious about holding a pause in monetary policy - everything suits US Central Bank in the current state of affairs in the economy.

But at the same time, the Fed will continue to flood financial markets with money through the Repo system. The Fed’s balance sheet reduction was replaced by a sharp expansion: according to the Fed, it plans to infuse $ 500 billion. If this happens, then by mid-January the Fed’s balance will increase its balance by 10% in just a month. As a result, the balance will exceed $ 4.5 trillion and reach new record levels. Honestly speaking, instead of gradually removing this money from the system, the Fed continues to increase its amount. In the end, it will end badly.

For the dollar, this, in our opinion, is a kind of sentence. Classic demand-supply chart: with a sharp increase in supply, the price should decline. So this week and for the foreseeable future, we will sell the dollar across the entire spectrum of the foreign exchange market.

The first ECB meeting chaired by Christine Lagarde ended with nothing - the monetary policy parameters did not change. But the new head of the ECB made it clear that it was time for the Central Bank to change its strategy of action and promised to present its vision by the beginning of 2020.

The main event of the week was the victory of the conservatives in the parliamentary elections in the UK. Many have already called this a kind of second Brexit referendum since voting for Johnson is a vote for his plan to leave the EU by January 31st. The pound on this occasion rose sharply on Friday, reaching 1.35. After that, we perceive some correction as an excellent chance for its cheaper purchases. Indeed, by and large 1.35 - this is not the limit of growth and the pound could well grow to the area of 1.40 and even higher.

As for the interesting perspective positions USDRUB purchasing (this will become a kind of hedge for other positions on the sale of the dollar against the euro, pound, Japanese yen and other base currencies).

In general, the week ahead is quite eventful: the announcement of the results of the Banks of England and Japan, GDP of the USA and Great Britain and so on. This means that it makes sense to start trading after a rather long period of hibernation in the foreign exchange market.