Stock markets: Geopolitics remains the main negative factor
The foreign exchange market
The two main factors that move the currency market last week, and both are negative for the dollar. At the last FOMC meeting, the first under the new fed Chairman Powell raised the rate, as expected, at 0.25%, however, contrary to expectations, has not revised the rate for a rate hike this year in the direction of acceleration. In addition, trump has started a trade war against China, introducing duties on Chinese goods to total $50 billion/year, expandable to $60 billion/year. The Chinese are willing to answer. Stocks fell, the yen rose, the dollar under pressure across the spectrum of FOREX. On the weak dollar and rising volatility of stock markets has increased the precious metals, and oil.
The dollar index under pressure, aimed at re-test support in the area of 88.4, breakdown is very likely, however, if it happens, we do not expect acceleration. EUR/USD konsolidiruyutsya in the triangle on the daily chart, the consolidation is bullish in nature. GBP/USD looks bullish, he was supported by positive news for Brexit and also the fact that some members of the Council of the Bank of England in February, have voted for rate rise.
USD/JPY remains under pressure, as we expected, went below 105. There are indications that the new seabed in the area of 104.6 can be sustainable. Now we recommend to buy the pair on dips, expecting a short recovery in risk appetite. In favor of the termination of strengthening of the yen in the short term, says short-term rates at UST.
EUR/JPY early in the week, stays below 130, but trying to get back above. A week ago we thought that the pair broken below 130, but within weeks there were attempts to return above, such attempts are observed in the beginning of this week. Breakdown 131.1 neutralizes up short-term bearish picture. Given the divergence on the purchase, formed last week on the daily timeframe, we now take a neutral position on this pair, expecting to clarify the technical picture. As for GBP/JPY, it did not meet our bearish expectations, and now we look at it neutrally.
In EUR/GBP, we noted and continue to note the bullish potential in the medium term, but in the short term, the pair returned to the lower border of the consolidation range in the area of 0.87, will continue to attempt to break it. We still don’t recommend to bet on this sample, which already happened last week, turned out to be false support strong.
Commodity currencies supported by rising oil and weak dollar. We expect to continue short-term recovery AUD/USD, USD/CAD will remain under pressure. Medium-term view, as for raw materials and commodities, the negative: the escalation of trade wars will lead to a drop in demand for raw materials and will hit commodity prices even with a relatively weak dollar.
On the political front in Europe continues business Skripal, the British seek to mobilize EU and the US for diplomatic war with Russia. However, on some measures of intensifying economic pressure on the Russian economy do not say threatening only accounts of the Russian oligarchy in British banks. We urge you not to overestimate while that established by the British noise and pay more attention to the oil that now costs about 4000 roubles/bbl.
Such a high price and the fact that speculators, according to CFTC data, again started to increase long positions in the ruble, now eliminates the development of pressure on the ruble. We do not suggest to buy the dollar at current levels in the area of the 57+, many wait for lower USD/RUB to a couple of percent. Medium-term view on the ruble, however, negative, as a glance at commodity currencies as a whole.
The stock market
S&P-500 began a second wave correction this week waiting for recovery attempts. RTS, fell into the framework of global trends, and also will probably try to rebound with the support of oil. Medium-term view on the us market remains neutral for the Russian market is rather negative. In the medium term we still do not recommend opening positions in Russian securities, as political pressure on Russia may worsen, and the support from the commodity market will not grow.