Analytics › MARKET REVIEW, MAY 21– MAY 25, 2018

MARKET REVIEW, MAY 21– MAY 25, 2018

EUR / USD

Bearish rally that has started in the second part of April continues today. American economy is gaining momentum rapidly, and the Eurozone, on the contrary, is slowing down. So extinig the quantitative easing program in September this year is not expected. The significant strengthening of the US currency is not the reason for that, but political risks and a significant slowdown of the EU economy.

After the Italian "Eurosceptics" have created the coalition, rumors began to circulate that Italy is to leave the EU. The ECB has bought Italian government bonds for 250 billion euros as part of the QE program. The Italian coalition does not really want to pay this debt to the ECB and demand to write off otherwise they threat to exit the Eurozone. The ECB faces a difficult situation, since it is simply impossible to write off such debt, as the rest of the EU can demand the same.

Besides, trade wars has always damaged European economy, as 40% of the EU GDP is export, while US duties and other restrictions significantly limit the EU's trading opportunities.
The most volatile news for the Europe will be German GDP and the minutes of the ECB meeting on Thursday. Many expect that the current drop of the euro, is a correction after good 2017 (the euro rose to the dollar by 14%). That the slowdown in the Eurozone economy has a seasonal nature and the epidemic of influenza.

Today, the American currency looks very strong, and the global appetite for risk may strengthen bears in the main pair. Support for the euro 1,175 has already been tested last Friday, but at the moment the nearest target of the pair is 1,1641-1,161.

MARKET REVIEW, MAY 21– MAY 25, 2018

GBP / USD

The upcoming week is highly important for the British pound, the first signals of its strengthening may appear. It is not that easy for UK to exit the EU, besides, pretty disappointing economic indicators, does not attract investors.

On Wednesday, it is worth paying attention to the pound, at 08:30 GMT, a report on the inflation of the Great Britain will be published. On a monthly basis, the indicator is expected to raise by 0.4% (to 0.5%) in April from 0.1% in March.

On Friday will be published GDP of Britain for the first quarter, in quarterly and annual terms. There are no changes expected and in terms of a small economic slowdown, the the invariability of the previously achieved level of GDP - 0.1% in the quarterly and 1.2% year on year will be the good signal.

It is going to be an extremely important week for the sterling: if the macro statistics data is going to fit the expectations, the pound will be able to return the investors’ interest and in case inflation accelerates above expectations, a stronger correction will follow. At the moment the chances of raising the interest rate of the Central Bank of England are estimated at 60% in August and at 80% in November. And if inflation slows, the chances are significantly smaller. An extremely sharp slowdown could put an end to the rise this year.

As they say "buy the rumor, sell the fact", before releases it is necessary to pay attention to the "mood" of the market. Because from the current, fairly broad consolidation, the pair will be able to up to the nearest resistance of 1.36, or continue the bearish peak to the nearest support of 1.33.

MARKET REVIEW, MAY 21– MAY 25, 2018

GOLD

The investors’ appetite for risk leads them away from the shelter asset, and the psychological level of 1300,00 was passed by the bears last week. Monday is usually a calm day and traders and investors wake up and are determined with further plans for purchases, or sales.

The aggravation of the "Korean truce" can restore the relevance of gold, but so far only rumors about the cancellation of the summit between the North and South Korea involving the US, are not enough. So, as the United States did not stop preparing for the summit, the whole world expects it to take place. South Korean President Mun Zhe Ying on Tuesday plans to discuss the historic meeting of Donald Trump with the leader of the DPRK in Washington.

The danger of trade wars between the US and China is dropping, the dialogue has begun and has come to a fragile consensus - to significantly reduce the US trade deficit with the PRC. But since, fundamentally, such an agreement is beneficial only to the United States, this week the US-Chinese "trading world" will be tested.

By the end of the last trading week ten-year US bonds slowed down, profitability fell to 3.06%. But after market open on Monday has already added + 0.011. If the US bonds rally continues this week, gold could reach next psychological level of 1,250.00. It is worthwhile to monitor geopolitical risks and yield of US bonds -this week these are the main indicators of the movement in the price of the shelter asset.

MARKET REVIEW, MAY 21– MAY 25, 2018

OIL

Black gold can show growth for the third month in a row. The "fragile" trade consensus between US wandith China, the Middle East geopolitical tensions and the meeting of the heads of the Ministries of Energy of Russia and Saudi Arabia, everything supports the asset.

Also, the growth of the drilling rigs number has slowed down, Baker Hughes data confirms that, the amount remained the same 844. Plus, the decline in crude oil inventories in the States last Wednesday.

Monday is usually corrective for this asset, but after corrective movement it is expected to attack the 72.00 level. On Wednesday, the data on the reserves of this raw material in the US will traditionally come out.

The OPEC member countries expect the price to be 80.00 and at the current conditions this goal is quite real.

MARKET REVIEW, MAY 21– MAY 25, 2018


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