News background and trading ideas for 22/11/2018

٢٢ نوفمبر ٢٠١٨

Today is a Thanksgiving day in the USA (the day off), so it’s quite likely American session will be exclusively calm today. Anyway, we shouldn’t relax completely. A “thin” market pose inherent dangers of strong and unexpected moves. However, there are no threats on the horizon.

Generally, as we’ve already noted at the beginning of the week, there is no much interesting in the fundamental background so far. Yesterday was quite as well in the technical level. It seems markets have decided to take some rest.

What is remembered day yesterday? Probably, perhaps, the Bloomberg report that Saudi Arabia in November 2018 increased its production to a record level of 10.9 million barrels per day deserves our attention. So oil sales on Tuesday are becoming clearer. As we see, key producers are not in a hurry to keep the promises and agreements voiced in life as a result of the last OPEC+ meeting in Abu Dhabi. This development entirely suits us, as it corresponds to our medium-term recommendation on oil sales. While there are no producers breaking production records, oil’s chances of growth are few.

Talking about the essential oil producers. The United States is launching three new pipeline branches next year, which will circumvent the current infrastructure constraints and potentially provide an opportunity to increase US oil production by 2 million b/d in 2019 (while the profitability of most wells is around $30 per barrel, and this is a benchmark for the potential horizon of falling oil prices). In addition, oil reserves (according to official data) in the United States increased again, and have grown quite significantly (by almost 5 million barrels, with the forecast of 3.45 million). So we continue to look for points for the asset’s sales.

And, of course, do not forget about the Russian ruble, which is still entirely dependent on oil at the fundamental level even despite that it has sharply reduced the level of correlation with oil in 2018.

Somewhere in Europe, meanwhile, the struggle between EU and Italy continues. Periods of optimism due to the rumors of compromise between the parties are replaced by moments of disappointment. In general, so far we tend to sell the euro, especially against the dollar. But amid increased euro dependence on news from the EU, we should be ready for sharp and unpredictable spikes in volatility.

Gold continues to justify our hopes and recommendations for looking points for it intraday purchases. Well, continue to adhere to this strategy.

Our core trading idea is the purchases of the British pound which is looking for news from the Brexit front so far. Since it should not be expected until the next week, we are just observing what is happening. Well, if possible, looking for points for pound’s purchases.