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TECHNICAL ANALYSIS

Jun 16, 2020

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TECHNICAL ANALYSIS

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TECHNICAL ANALYSIS

Jun 15, 2020

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TECHNICAL ANALYSIS

Sterling shed -0.27% to trade at $1.2506. The pound also eased slightly to 89.91 pence per euro, while the euro held steady at $1.1247.

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TECHNICAL ANALYSIS

Jun 12, 2020

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TECHNICAL ANALYSIS

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TECHNICAL ANALYSIS

Jun 11, 2020

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TECHNICAL ANALYSIS

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TECHNICAL ANALYSIS

Jun 10, 2020

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TECHNICAL ANALYSIS

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TECHNICAL ANALYSIS

Jun 09, 2020

  • Technical Analysis

TECHNICAL ANALYSIS

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Why Covid-19 Outbreak and Russia-Saudi Oil Price War Shock Is Not Like 2008 Financial Crisis?

Mar 13, 2020

  • Technical Analysis

Why Covid-19 Outbreak and Russia-Saudi Oil Price War Shock Is Not Like 2008 Financial Crisis?


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Earlier this week, market has been shocked by a sudden and historic collapse after Saudi Arabia launched a crude price war against Russia. Since then, the oil market suffered by as much as 30% fall in the largest single-day drop, largest since the U.S. invaded Iraq in 1991. Brent crude oil closes at $45.27 per barrel on Friday last week and plunged 30% on early trading to $31.02 per barrel, its lowest level since February 2016. West Texas intermediate (WTI), dropped $41.28 per barrel and opened at $34.27 per barrel on early trading.

Since earlier this year, the spread of COVID-19 has prompted global market tumbling and uncertain. With China being the world’s largest importer of oil and second largest consumer of oil, implicated by the shutdown due to the coronavirus outbreak, crude oil consumption in the country has declined sharply, leaving a glut on the global market, triggering big price drops.  The novel coronavirus COVID-19 source was believed to begin at a ‘wet market’ in Wuhan, China and since its shocking discovery around December last year, it has expanded to touch nearly every corner of the globe. The number of confirmed worldwide cases has reached more than 125,000 today with Indonesia, Turkey, Ivory Coast and Egypt reporting first cases into the country. The death toll from the virus has now topped 4,600 – including 38 in the U.S., and the number is expected to keep growing, with no end in sight.


6-months oil market price


Meanwhile at Wall Street, panic selling drove to yet another consecutive losing week with negative sentiment wiped out more than $10 trillion in global stock market value since late-January virus concern. Main U.S. financial indexes were seen closed at red, with Dow plunged 2,013.76 points, or 7.8%, to 23,851.02, marked the largest one-day point loss for the Dow on record, and the largest single-session percentage hit since 2008 financial crisis. The S&P 500’s more than 7% drop to end at 2,746.56 was also the most since December 2008, led by stunning declines mostly in the energy and financial sectors. Nasdaq plunged 624.94 points, or 7.3%, to finish at 7,950.68. All three U.S. major benchmarks suffered their biggest one-day percentage declines since the financial crisis in 2008.

Markets were moving back up on Tuesday as some investors dips their toes back in before resumes their downtrend on Wednesday, with Dow tipped into bear market and other are also measuring to touch bear-market territory. Dow Jones index were the most effected following another steep selloff on Wall Street that snapped a more-than-decade-long bull market.


3-months U.S. major index benchmark


Driven by history of U.S. subprime mortgage debacle, the question being asked – are we going in the same way as 2008 financial crisis or are we in uncharted water, as we’re going ahead?

To compare, 2008 financial crisis were more indirect as it mostly affected financial institutions, banks and the capital market. Meanwhile, COVID-19 is affecting broader business sectors, including tourism, transportation, trade, manufacturing and investment. This is more complicated issue as it involves humans and their lives. It deals with people’s willingness to move around and conduct activities, so the risk would be in the real economy. Possibility of job terminations comes from companies who cannot operate as usual, such as airlines, hotels and manufacturing sector, which are experiencing a disruption in the supply chain. This economic downturn also puts pressure on global oil price with government banning travelling, airlines cutting flights and tourists cancelling business trips and holidays. On top of that, Russia-Saudi oil price war even worsen the situation.

With stock market sinking, interest rate cuts, increased unemployment, government stimulus packages and talk of recession, it is looking a lot like a “Déjà vu” of 2008 financial crisis. However, analysts and asset managers say that there are fundamental differences between the two.

For one thing, today economy and financial system is now better and more robust than it was in 2008 to avoid systemic damage and to withstand COVID-19 coronavirus impact. 2008 downturn was a set off by an overheated housing market, before prices comes spiralling down pushing banks to the brinks of bankruptcy. This time, the threat is external. With tighter regulations and better capitalization, an appropriate arrangement can be done from time to time to counter the impact. On Tuesday, President Donald Trump floated the idea of ‘payroll tax cut or relief’ measurement to offset the negative impact from the coronavirus outbreak. The potential tax incentives come on top of an $8.3 billion spending package Trump signed last month. Recently, White House also inviting Wall Street executives and banks management to discuss the response to the new coronavirus impact. While recession is highly likely, it is likely to be brief and much less severe than the before. For one thing, the 2008 financial crisis and recession resulted from years of deeply rooted weak spots in the economy. That’s not the case now.

The question is how much ammunition left do government left to fight a more severe economic downturn or drawdown in risk assets.

More fearmongering than real situation. While U.S. stocks are in panic sell-off, China’s investors have already passed that scare phase. China’s stock market, at the heart of the outbreak, is back to making money again. China’s swift and strict measures to contain the virus, optimism over fiscal and monetary stimulus, and relatively reasonable valuations are among the key reasons for the recent rebound. A gauge of Chinese stocks in Shanghai and Shenzhen just posted its best week in a year - a 5% gain - after touching a two-year high on Thursday. Meanwhile, the S&P 500 Index has fallen more than 12% from the record it reached last month, with volatility surging.


3-months markets (around start of COVID-19)


Unemployment. Since the start of recession in December 2007, around 11 million Americans lost their job, lasting 18 months. Unemployment more than doubled to 10%. Meanwhile, in the current crisis, losses are estimated to be in the total of thousands, with travel and tourism and manufacturing enduring much of them. Some companies such as Facebook, Google, Twitter and Amazon are asking more employees to work from home as the outbreak continues to spread. Banks also are scrambling their workforces to reduce the risk. JPMorgan Chase has dividing their sales and trading teams between separate offices and Bank of America said that they’re splitting its fixed income and equities trading teams. Measure taken to ensure business can be continued even if they can no longer access Wall Street or locations in central London.

In the matter of the oil price war, it all comes down to how much pain can each of the country take. The crisis undoubtedly will be damaging and forcing both countries to make difficult adjustments to the economies longer it dragged on. The world’s top two oil exporters are now claiming that each have enough resources and means to tackle economic shocks. Moscow said that they could withstand oil prices of $25-$30 per barrel for 6-10 years. While Riyadh declares that they can afford oil at $30 per barrel but would have to sell more to soften the hit to its revenue. The Kingdom is currently pumping up to 9.7 million barrels per day but has the capacity to ramp up to 12.5 million barrels per day.

Another issue, however, is that governments and central banks were able to throw massive amounts of money at the problem in 2008. That may not be as effective this time around. While announcement of President Trump’s fiscal stimulus seems to put more money into the financial of workers, but some economists have questioned whether typical stimulus measures will work during the coronavirus crisis, as many people being cautious and stay at home. That means, even with more money, Americans may not be spending it at restaurants or the movies. There are concerns that monetary policy remedies take time to flow through the system.

Take a breath. While the toll the infection ultimately takes on the nation isn’t clear, the economic upheaval caused by the outbreak will likely not be nearly as damaging or long-lasting as the historic downturn of 2007-09. As long as pre-emptive and coordinated policy response is delivered. In short, as the virus and oil crisis build and threatens a global economic recession, and the need for global cooperation is most acute, it remains to be seen if world leaders can step up and provide effective leadership to mitigate the risk. Economy’s major players - consumers, businesses and lenders are much better positioned to withstand the blows and bounce back. This will allow for a faster economic rebound after the crisis is brought under control. While fear can bring down the market lower, but a quick recovery is expected when the threat diminishes.

 
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Russia vs. Saudi Oil Price War: Who is the Victim?

Mar 10, 2020

  • Technical Analysis

Russia vs. Saudi Oil Price War: Who is the Victim?


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The oil price has suffered an historic collapse on Sunday evening after Saudi Arabia shocked the market by launching a price war against onetime ally Russia. Since then, the oil market has fall by as much as 30% in what the largest single-day was drop since the U.S. invaded Iraq in 1991. Brent crude closes at $45.27 per barrel on Friday and plunged 30% on early trading to $31.02 per barrel, its lowest level since February 2016. West Texas intermediate (WTI), dropped $41.28 per barrel on Friday and opened at $34.27 per barrel on early trading today.

Since earlier this year, the spread of COVID-19 has prompted global market tumbling and uncertain. With China being the world’s largest importer of oil and second largest consumer of oil, implicated by the shutdown due to the coronavirus outbreak, crude oil consumption in the country has declined sharply, leaving a glut on the global market and triggering big price drops. Globally, changes and reaction in oil prices can be seen as being very significant.

Last Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day starting in April and to be extended until the end of the year. However, Russia rejected the additional price cuts when the allies, known as OPEC+, met later on Friday, announcing that present oil prices were sustainable for the Russian economy and Russia had the tools to react to any adverse results of the spread of the coronavirus on the global financial climate. OPEC failures to strike a deal in cutting oil production fanned concerns that sends it into a price war. The failure of the Vienna meeting left the oil industry shell-shocked, sparking a 10% plunge in oil prices Friday. In the effort to retake market share and building up pressure on Russia, Saudi Arabia escalated the situation further over the weekend by slashing its April official selling prices by $6 to $8, all the while looking to increase its daily unrefined output by as much of as 2 million barrels per day into an increasingly oversupplied international market.

Now, Russia and Saudi Arabia, the two biggest exporters, are saying they’re going to maximize production and flood the market.

This move is basically a response to years of frustration – For years, Russia and OPEC has been cutting their oil production, while losing market share to U.S. shale, which has won a big piece of the market and turned U.S. into a major exporter for the first time in decades. The 2014-2016 oil crash caused dozens of oil and gas companies to file for bankruptcy and hundreds of thousands of layoffs. All the while, the US shale industry emerged from that period stronger and the United States would eventually become the world's leading oil producer. And now, as the two oil superpowers face-off, American oil companies may end up as the biggest victims. Russia's refusal to cut production is a slap to US shale oil producers, many of which need higher oil prices to survive. And now the Saudis also have announced big discounts on their crude, particularly on the one sold to U.S.

Pace of growth in the U.S. will be expected to slow in 2020. Oil prices have been floating around $50 to $60 all year. While at this rate, most companies can basically still turn a profit. But now, as the prices are in the $40s and continuing to dwindle, the impact will be massive. Declining demand, high competition, low profitability and market uncertainty is going to hit U.S. domestic industry hard. Long-term lower prices for the oil industry - both the industry and the economy will feel the effects. If the coronavirus outbreak is still not contained and the price of oil keeps falling fast, we may continue to see pump prices falling in the coming weeks. Near-term future looking bleak and prediction looking increasingly low-spirited for the balance of the years ahead. A recession in the US and the eurozone in the first half of the year was now “a distinct possibility”.

 
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Will we see 2 more rate cuts?

Aug 07, 2019

  • Technical Analysis

Will we see 2 more rate cuts?

As late as last December, Goldman was expecting four rate hikes in 2019. Then, as recently as mid-June, the “smartest men in the Goldman room”, did not expect the Fed to cut rates at all in July and September. Of course, all that changed when it became clear that “Powell has thrown in the towel”, and will follow the demands of the president and the whims of the market, resulting in the first “mid-cycle” rate cut last month in over a decade.

As a result, Goldman’s “base case is now that no deal will be reached before the 2020 election. We expect the newly announced 10% tariffs on the last $300bn to remain in place on Election Day, and other forms of tit-for-tat retaliation are possible along the way.”

In parallel with this extended trade war, the bank has extended its prior forecast of two rate cuts in 2019, and now expects two back-to-back rate cuts from the Fed: “In light of growing trade policy risks, market expectations for much deeper rate cuts, and an increase in global risk related to the possibility of a no-deal Brexit, we now expect a third 25bp rate cut in October, for a total of 75bp of cuts.

Goldman explains that “the balance of risks has shifted enough to make a third 25bp rate cut in October the most likely outcome, for a total of 75bp of cuts including the July cut.” Specifically, for the September meeting, Goldman sees a 75% chance of a 25bp cut, a 15% chance of a 50bp cut, and a 10% chance of no cut. For the October meeting we see a 50% chance of a 25bp cut, a 10% chance of a 50bp cut, and a 40% chance of no cut.

This is contrary to the message the Fed was trying to convey, as Mericle thinks “the FOMC most likely envisioned at its July meeting that rate cuts would eventually total 50bp. This strikes us as the best guess of what Chair Powell meant by a “mid-cycle adjustment” to “adjust policy to a somewhat more accommodative stance over time,” as well as the most likely compromise on a divided committee in which many participants were skeptical of the case for cutting at all.”

So picking up where Goldman left off last week when it tried to infer what it would take for the Fed to stop cutting rates, the bank now says that “for rate cuts to stop, Fed officials will eventually have to withstand White House demands and perhaps bond market expectations as well” and it adds that by the December meeting “the FOMC is likely to stop.”

Source: Goldman Sachs and Zerohedge
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3Q 2019 – Facebook again on the rise

Oct 07, 2019

  • Technical Analysis

3Q 2019 – Facebook again on the rise

The price development of Facebook shares (NASDAQ: FB) in fiscal year 2019 regained momentum after a sharp decline in the second half of 2018. The stock is currently trading for around $186 with a 52-week trading range of $123 to $208. Speculators, predominantly derived from hedge funds, believe that there is room for positive development.

The price development of Facebook shares (NASDAQ: FB) in fiscal year 2019 regained momentum after a sharp decline in the second half of 2018. The stock is currently trading for around $186 with a 52-week trading range of $123 to $208. Speculators, predominantly derived from hedge funds, believe that there is room for positive development.

The price development of Facebook shares (NASDAQ: FB) in fiscal year 2019 regained momentum after a sharp decline in the second half of 2018. The stock is currently trading for around $186 with a 52-week trading range of $123 to $208. Speculators, predominantly derived from hedge funds, believe that there is room for positive development in the coming days/weeks in the price of Facebook shares and that the potential of the company will in no way be affected by the historically highest sanction. So far, it has been imposed on Internet companies for the illegal handling of personal data.


The number of daily active Facebook users has risen to 1.59 billion in the second quarter of 2019, up 8% YTY. FB mobile revenue increased to 94% of total ad revenue compared to 91% in the same period last year.

With an increase in the number of users per day and advertising revenue, Facebook’s consolidated revenue grew 28% year on year in the second quarter. Adjusted earnings increased from $1.74 per share over the previous year to $1.99 per share.

“We had a strong quarter and our business and community continue to grow,” said Mark Zuckerberg, Facebook founder, and CEO. “We are investing in building stronger privacy protections for everyone and on delivering new experiences for the people who use our services.”

Despite the strong growth in Facebook stock prices, further positive development is supported by a strong evaluation of the company based on the significant increase in financial results. Its shares are traded at about 22 times the profit in line with the industry average. The company expects further growth in the upcoming two quarters this year, which could help increase the dynamics of stock prices.
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EURUSD: Euro weakens as Draghi reiterated downside risks

Mar 28, 2019

  • Technical Analysis

EURUSD: Euro weakens as Draghi reiterated downside risks

ECB president Mario Draghi emphasized at latest speech in Frankfurt forum downside risks in euro area for both price and growth outlook. Draghi at the end of the speech repeated his commitment to boost price and assured that ECB is still not short of instruments to deliver its mandate. Below target inflation was confirmed by weak figures from Germany and surprisingly also from Spain yesterday, despite it is still growing more than twice times faster than euro area average. Negative circumstances such as weak global trade growth, brexit and China´s slowdown put additional risk on export-oriented eurozone economy, dampening price pressures. Interest rate hike by ECB is moved to 2020 definitely. According to us even rate hike in the first quarter of the year 2020 seems really unlikely, because of planned change of the ECB president at the end 2019.
On other side, chairman of the FOMC Jerome Powell at last meeting turned on ,wait and see mode´, with possibility of no hike in 2019. Unlike the ECB, this scenario seems maybe too dovish - the core inflation still holds around 2 percent and strong labor market with unemployment at 3.8% getting even more tighter. Solid economic growth, forecasted about 2.2% this year can be also sustained in 2020 as it is a year of presidential elections. Based on these fundamental facts, long-term outlook for EURUSD is bearish.
Technical outlook also confirms bearish bias. When you look at broader picture at weekly candle chart, price is getting under weekly 200 MA right now - confirming descended channel from May 2018 and head and shoulders pattern from the beginning of the year 2017. Short-term target at 1.10 EURUSD can be tested relatively fast. In longer-term the move under 1.10 looks like the most probable option.

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Number of Chinese Tourists Abroad to Decline and Effect Negatively Global Economy

Dec 09, 2019

  • Technical Analysis

Number of Chinese Tourists Abroad to Decline and Effect Negatively Global Economy

International Monetary Fund (IMF) expectations in connection with Chinese economy tend towards the situation, that the country should have a moderate trade deficit in the next two years. This can affect also the global economy that is currently in „recession pending“ state. According to Golden Brokers It’s probable that the number of Chinese tourists abroad will also decline together with the reduction of Chinese savings. That will cause a significant cut of capital flow to other countries – including the USA.

Based on IMF estimates, the Chinese economy is expected to reach the trade deficit in the next two years. In spite of the fact that since 2001 China has been proud of its trade surplus, it started to gradually decline after the financial crisis in 2008. Currently it’s moving close to zero.

The main reason regarding this evolution is probably a sharp increase in international tourism of Chinese residents thanks to the increasing wealth of the middle class. According to the available sources, the volume of Chinese people travelling abroad increased from 42 to 162 millions between 2008 and 2018, which represents a growth of around 252 percent. The consequence of this trend generated the deficit of 250 billions USD last year.

Another fact that cannot be overlooked is that China is currently the largest goods exporter in the world. The proportion of its export on total world export reached almost 13 % in 2017, according to World Trade Organization. For a comparison, it was only 4 % in 2001. But the salaries, that grew gradually, could not follow the actual growth of increasing export pace and caused sharp increase of household savings. Based on data from OECD, saving increased from 28.2 % in 2000 to 39 % in 2010 and still stay relatively high. But Chinese population is aging and this leads to the trend that people start spending more than they earn and consequently push the savings levels downwards. The last figure of savings was 36.1 percent, in 2016.


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Graph 1: Yearly evolution of household savings in China

The deficit can also be found in the services sector and surpluses are gradually decreasing in the sector of goods trading, too.

In its report of global economy outlook, IMF subsequently decreased Chinese economy growth estimation for 2020 from original 6.6 percent in previous year to 5.8 percent.

China‘s public debt significantly grew over the last years as well and is currenty the highest in the past 25 years. Although it was moving around 33.7 % of GDP in 2010, data from 2018 show approximately 50.50 % of GDP in 2018.



Graph 2: Growth of percentage of China's public debt compared to country GDP in the last 25 years
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