News background & trading ideas for 08/03/2019

٨ مارس ٢٠١٩

One of the main events of the previous day was the announcement of the results of the ECB meeting. The rate is unchanged as we expected. Forecasts for economic growth in the Eurozone were sharply lowered (GDP rates are projected at 1.1% in 2019 instead of the previously expected 1.7%). As a result, the ECB has decided to mitigate the monetary policy a little bit more as a reaction to the weak macroeconomic data released recently. It is about launching a new long-term loan program in September. This is the third bank lending program (TLTRO III). Thus, the results of the meeting can be called “dovish” and definitely against the euro.
Exactly that was expected by EURUSD to break down the lower boundary of the range. After taking basic support, our position on the euro has changed. While the pair is below the 1.1300, we are looking for points for selling EURUSD.

In this case, we note that today’s balance of forces on the foreign exchange market may change. Today all the attention of financial markets will be focused on statistics on the US labor market. Moreover, earlier we recommended paying attention to wage growth rates, since this indicator affected the position of the Fed, but now, in case of the pause from the Central Bank, all attention should be paid to the NFP indicator.
Analysts' forecasts generally correspond to the average value of the indicator over the past couple of years, namely 180-190K. We expect weak data. The reasons are both economic and purely statistical. The last 2 times the data was above 300K, and most importantly, almost 80% higher than analysts' forecasts. We just don’t remember that over the last 6-7 years, when the indicator went better by 80% twice in a row. In fact, usually, after a strong deviation from forecasts for the better, the data is much weaker than forecasts next months. And in our case, the excess was two months in a row. That is a kind of statistical anomaly. And anomalies, as is known, cannot exist for a long time.

In addition, we recall that the U.S. economic statistics is not so impressive in recent years. Quite the contrary: retail sales were frankly failing, GDP growth rates were lowered, business activity indices were below forecasts, etc. So, our recommendation for today is to sell the dollar, without waiting for publication of data. The reason is that we expect weak figures on NFP. We continue to find confirmation in favor of our position on sales of the Russian ruble. Starting with lowering the ruble exchange rate forecasts by the Ministry of Economic Development (for 2019, it was lowered almost by 5%), to a sharp increase in buying the US dollar in the foreign exchange market by the Bank of Russia (procurement volume increased by 50% from 12.5 billion rubles to 18.3 billion rubles). This is definitely a bearish signal. Therefore, we recommend to sell the Russian ruble in the medium and long-term directions.

Other positions: while gold is below the 1295, we recommend to sell it and buy the oil on the intraday basis. We do not buy USDJPY today, because there is a high risk of dollar sales in the foreign exchange market (besides, the data on Japan's GDP turned out to be higher than expected).
And we note that the data on the NFP will trigger a rise in volatility on the financial markets. So, receive the data out of positions and open new ones just after the publication of data on them.