EUR Rosses Edging Higher While ZAR Also Stronger

As the old saying goes, if something sounds too good to be true it usually is.

This has unfortunately been the case so far this week for investors when it comes to hope over progress on a coronavirus vaccine. Sadly we do need to brace ourselves for the potential long-haul journey that all will be encountering when it comes to attempting to getting over the mountain with the virus. What this means for investors is that all asset class will remain sensitive to vaccine-related developments. Should the news flow turn positive once again, we can expect that market trends in the direction of stronger stocks, risk appetite and less demand for safe havens can continue. And vice versa if the narrative is not providing a positive picture.

Opportunities that traders could keep an eye on at the moment is the improved buying demand for the Euro across its counterparts. EURGBP and EURJPY are perhaps the more impressive ones. EURJPY is now within 30 pips of the potential high that it could reach as maybe 118.80 as highlighted here.

EURUSD continues to find a potential limit on its advance around 1.10. For a stronger correction in the Eurodollar, it is likely that potential buyers will wait to see whether EURUSD can peek its neck above the waters of 1.10 first. EURGBP also looks appealing with some gas perhaps left in the tank for the pair to point higher. Buyers potentially require a close above 0.90 for today’s daily candlestick for further encouragement on the conviction of this pair.

Elsewhere one of the unlikely winners from some helping hands to support emerging markets has been the South African Rand. USDZAR declined to its lowest level since late March following the central bank cutting interest rates in South Africa once again today. Should USDZAR continue to trend lower, it is possible for the pair to decline to levels not seen since earlier in the same month of March.

While trading volumes and volatility appear slow for major stock markets into the end of week, it might be worth keeping an eye on S&P 500 on the daily charts. This asset has struggled to move above 3000 since early March but price action is suggesting another attempt could be on the way.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

To Believe or Not to Believe in Virus Vaccine Hopes?

The fuel for the flames were reports over progress being made on a vaccine for the coronavirus and although everyone, everywhere would like to see progress being made on this front the optimism is still very preliminary.

One opportunity that potential traders could keep an eye out on is whether the USD begins to lose some of its shine as a safe haven asset. We have been here many times before, but we are once again seeing a few cracks appear in the shield of the USD.

GBPUSD is taking advantage of some of the USD vulnerability with the pair attempting its second successive daily rally. Further resistance on the Daily chart can be found at 1.2271 and 1.2338, but it also can be pointed out that the same chart suggests that the pair is still in a downtrend of some sort and we haven’t seen a failure swing candlestick suggesting a deeper rebound as of yet.

One pair that has enjoyed this period of USD weakness is the EURUSD, which has rallied by close to 200 pips so far this week. It can be expected that 1.10 will act as a major wall that could once again, prevent further upside in the Eurodollar. It is also worth pointing out that the current candlestick on the Daily chart is lacking some conviction, suggesting that buyers are not convinced with confidence to keep positions.

Where the trend for a stronger Euro has been made more clear is in the EURJPY. EURJPY has now stormed past 118 as suggested here. It will be a stretch after a near 300 pip advance across recent trading days, but a test for the pair is whether it will be able to climb as high as maybe 118.80.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Finally Time to Question The Recovery in World Stock Markets?

It has frequently been highlighted that the recovery in risk has been largely assisted by central bank easing policies and easier accessibility to money through government initiatives and the warning from Federal Reserve Chair Jerome Powell just yesterday that the current pandemic raises concerns about long-term economic damage with significant downside risks to the outlook has further highlighted anxiety.

Now, if another period of risk aversion does hit us (if) then the likelihood is that safe havens will be in demand once again. This potentially sounds promising for those who hold USD, JPY or Gold in their portfolio. Of course and as it is often remembered, in USDJPY a period of market uncertainty generally indicates a weaker USDJPY.

For what it is worth, I hold some doubt over how long this risk aversion will last as the market remains erratic overall but in the event that USDJPY does point further lower, 106.50 and 105.90 could become points of interest.

The Nasdaq presents a more interesting picture on the Daily timeframe of an asset that is perhaps starting a trend lower, however it is also important to note that this index consists of many major corporations from the technology sector that have shown in recent times that they can perform strongly in times of a crisis. Such as Netflix and Amazon.

However, if the Nasdaq does continue to point lower then the Daily low last seen on May 5, May 4 and April 22 could be looked at as potential areas of support.

The Daily chart on the S&P 500 highlights that 2710 and 2630 are potential support levels that the index could look for should the S&P hypothetically turn further lower.

For the Wall Street 30 Mini on the H4 charts a decline below 2283 could indicate further potential price weakness towards 2260 or 2245.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Will 1.22 Support in GBPUSD Prevent Further Declines?

The economic data from the United Kingdom followed a similar undesirable pattern to expectations given the global pandemic and subsequent weakness the world economy is facing.

The GDP data release showed a 2% quarter-on-quarter decline for the UK economy, however this has offered no end to recent nail-biting economic readings with it also being announced that the UK economy in March alone contracted by -5.8%. The latter represents the worst reading on record for UK GDP and given that the UK entered the pandemic somewhat latter than its peers, it presents a major warning sign that the Q2 GDP reading will not be pretty.

On a fundamental basis for the UK only, the Pound should remain weak. The United Kingdom is still in a very fragile state with coronavirus disease infections, as well as no clear indication in sight for when lockdown restrictions could be noticeably eased.

Should this bleak landscape remain unchanged and as long as the USD remains resilient (a big if) there is an argument to be made that the GBPUSD could potentially return to 1.20 at some point before the second quarter of 2020 concludes. Again, the USD will have a pivotal say in this and how the Dollar has traded in recent weeks has been anything but predictable.

On the Daily charts, support marginally above 1.22 could be seen as a near-term floor for GBPUSD. This would represent roughly the lows for the Daily candlesticks on April 6, April 3 and as far back as March 16. If this level were to break, the Weekly low from August 25 2019 just above 1.2138 might become an area of interest.

EURGBP on the Daily charts continues to trade in a tight range. For a potential breakout to the upside, hypothetical buyers might wait to see if the EURGBP can break higher than 0.8862. Otherwise the continuation of a range that has been in place since early April remains on the cards.

The GBPJPY could be the pair to watch, if the right combination is in place. Pound weakness as well as a stronger JPY due to safe haven demand for the Yen would be monitored to see if the pair can possibly break below 130.48.

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Will The Clock Unveil More New Virus Cases as Restrictions Ease?

Both Germany and South Korea have each noted new infections of the coronavirus after lockdown restrictions were eased recently. A day or two of spikes higher in new cases will likely not set investor alarms buzzing right away, however it is a concerning signal and puts once again into question that some officials are arguably moving too fast to reopen based on what damage the fight against the coronavirus is doing to the world economy.

Should these concerns accelerate and more infections get announced from nations that have eased restrictions in recent weeks, the trends noted here regarding the Yen risk a short expiry date.

It is possible that another wave of potential risk aversion leads to weakness in stock markets, and could put on the table increases in USD, JPY and Gold as a result of improved safe haven demand.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

EUR Crosses Appear Fragile with EURUSD & EURJPY at Risk

Headlines that a new political row in Europe could eventually lead to a breakdown in the Euro are very premature, and it would take a number of other EU members to follow the path of the German court or even for Germany to threaten its own membership (even more unlikely) in order for a serious level of damage for the Euro to be in play.

For the meantime, the Euro has suffered against a few of its trading partners with both the EURUSD and EURJPY falling victim to the German court ruling.

The EURJPY has already declined to its lowest level since April 2017 on this development with further potential woes in the Euro threatening the EURJPY meeting levels not seen since 2016. The Daily and Weekly charts illustrate the negative state of momentum in play for the pair, with the Weekly candlestick low for week ending 16 April 2017 at 114.84 a level that can be met should the EURJPY fall below 115. It would take an acceleration in Euro fortunes to the downside for EURJPY to decline as far as 112.70 and perhaps even 114.40 should the situation for the Euro become far worse.

The situation in the EURUSD also appears bleak and the Eurodollar in recent days has fallen through the potential scenario previously highlighted here. Further support that can potentially be found should EURUSD momentum remain lower can be seen at the Daily low of 23 April at 1.0755 and the 24 April low marginally above 1.0726.

Elsewhere the GBPUSD has maintained a very quiet stance throughout the trading week so far. One risk that traders could be on the potential lookout for is whether the confirmation that the UK has now suffered the second highest world fatalities to the coronavirus in the world and highest in Europe increases the probability that the governmental lockdown in the United Kingdom will be extended.

If the GBPUSD does kick into a lower gear, possible support for the pair to find can be found at 1.2297 and 1.2204.

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Gold Awaiting Next Trigger in Volatility

The same can also be said for Gold, which is hoovering near $1705 at time of writing and appears to be awaiting its next trigger in volatility.

There is still hope for Gold prices to push beyond the seven-year highs that it has already met this year and many look at the economic challenges that will remain long after the coronavirus pandemic is over with as an opportunity for stronger Gold demand. I would however be keen to point out that at least for now, Gold is trading in a very narrow range and the end of this range with an upper-limit at $1740 would be required to the upside in order to open up a probability of Gold advancing towards $1800 over the coming months.

$1720 and $1740 are near-term resistance levels on the Daily timeframe that are preventing further increases in Gold.

Traders should also be mindful that at times where the market appears overly-positioned for a move in one direction, that this is where potential surprises in the other direction become a risk. For Gold this would be another round of unexpected selling.

The Daily timeframe suggests that the lows seen near the candlesticks on 13 April, 20 April and 1 May around $1670 is acting as a near-term support preventing further Gold declines.

Should this level be breached, $1655 might be viewed as a future support level for traders.

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USD And Gold Show Momentum as risk-off Sentiment Resumes

World stock markets are lacking appetite, perhaps as investors question whether the rally in April can really be justified and this is taking fellow risk assets down with it. Emerging market currencies, and those currencies considered as ‘risk’ are the ones that are lower against the USD on Monday. This includes the GBPUSD, EURUSD and USDCAD.

There is an old saying in the financial world around ‘selling in May and going away’ and should this sentiment continue into the month, the likes of Gold and the USD could be considered as ‘winners’ from this change in investor attitude.

The GBPUSD has been the largest loser of the majors so far in May, erasing nearly 200 pips. Should the GBPUSD continue to drop the following recent support levels can be looked upon as potential levels of interest; the April 29 low at 1.2387, the April 21 low at 1.2297 and the April 20 low at 1.2164.

If each of these levels are breached then we are looking at an increased probability of the Pound falling below 1.20 against the USD for the first time since late March.

The EURUSD is another example of a pair that has come under selling pressure from a renewed USD environment. If the Eurodollar continues what could be the start of a new wave of lower prices, 1.0892, 1.0857 and 1.0809 are potential support levels for EURUSD on the Daily timeframe.


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Is lightning Set to Strike Twice for U.S. Oil Price?

South Africa, Nigeria, New Zealand and the United Arab Emirates represent just a few of the countries that have loosened some restrictions in recent days, and the test of time on whether more countries are set to follow these footsteps will determine whether the modest rally in stocks can continue.

I have my own doubts on how much more fire can be added to the flame to push markets higher and a trend that investors can keep an eye on is whether any signals creep through that positions could be closed as April concludes. Upcoming central bank decisions from the likes of the U.S. Federal Reserve, European Central Bank as well as earnings announcements from corporations such as HSBC, Facebook, Samsung, Tesla and Amazon will also be viewed as event risks.

Can lightning strike twice for oil?

Investors will be unable to dismiss an element of recent history repeating itself with tanking oil prices and whether lightning could be set to strike twice. WTI has already dropped more than 12% so far during on Tuesday below $11 while Brent Crude is 5% down below $20. It looks like fear is kicking into investor sentiment following the insane shock just one week ago that eventually led to negative U.S oil prices and nobody wants to see the next contract expiry date follow the path of the May contract. As a result it appears that upcoming contracts are becoming very liquid, and investors can expect to see continued volatility.

No signs of lockdown exit strategy to risk sell in May trend for Pound?

The first speech from UK Prime Minister Boris Johnson on his return to work following his battle with the coronavirus indicated to investors that life in the United Kingdom as it stands will be very much stay at home throughout May. It was expected that we would have a cautious speech from the UK Prime Minister and any guidance from officials on a potential timeline for when some measures can be lifted will be viewed as a potential opportunity for a pop higher in UK assets.

Eased lockdown measures to threaten the Dollar’s throne?

One trend in the currency markets that can be watched closely is what impact signs of loosened government restrictions has on demand for the USD. The Greenback has shown signs of getting out of the wrong side of the bed so far this week with initial declines against a mixture of its counterparts, and more signs of eased lockdowns across several countries can be digested as a test ahead for King Dollar. As well as with emerging markets, some of the other currencies that can cheer potential weakness in the USD include the Euro, Australian Dollar and British Pound.

Prospects for South African assets improving, but Rand not completely out of the woods just yet

South African assets, including its currency and stock market are aiming to strengthen as investors continue to reflect positively that the economy is set to begin a partial reopening. Improved global sentiment based on other economies providing indications that they are also gradually loosening the leash on their own lockdown restrictions would also benefit South African assets on risk appetite.

Prospects are looking stronger for Rand, although there is a cautious undertone that the Rand and wider South African assets are not completely out of the woods yet. However, the majority of the tornado intensity that has seen the Rand weaken more than 30% during 2020 so far has hopefully passed.

The economic calendar of scheduled releases from South Africa for this week are mostly void of major tier-one data, although the trade balance for March is set to be announced this Thursday and it should provide insight on what impact the early stages of world lockdowns had on South African trade.

There isn’t a genie in a lamp that can be rubbed to take the last month away from memory, so there is a need for deep breathes as economic data releases globally point towards the direction that the fight against the coronavirus pandemic has threatened the worst recession in close to a century.

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Pain just Beginning for Emerging Markets, Still No Light at End of Tunnel Elsewhere

This battle is of course not receiving a helping hand from the climbing numbers of the disease and fatalities, which at the time of writing stands close to 344,000 cases globally and more than 15,000 fatalities across 187 countries.

There is a need for reality for those who might think a floor in world markets should be approaching after weeks of viscous declines that global markets can still drop much further. For all the declines seen in world markets, some equity markets that are only just approaching 2012 levels and even US stock markets are at 2016 levels, having at the end of last week erased the gains made since President Trump was elected.

Should the situation get further out of control, and there is still a stronger probability of this being the case than a miraculous cure developed anytime soon there is a likelihood that world equity markets can decline as much as 65% from their peaks. If this is accurate, then taking only US markets into account we are still only at the half-way line of the possible market carnage.

In the event that world stock markets decline towards 65% from peaks, the 2020 world health disaster that is known as the coronavirus will far eclipse the beyond 50% declines experienced during the historic global financial crisis twelve years ago.

As unfavorable as the above reads, there is also an unfortunate reality of which emerging markets need to be aware that collectively they are still at the early stages of the journey for market chaos. Both the Indian Rupee and South African Rand declined to new record lows today, while the Indonesian Rupiah weakened beyond 3.8%. USDMYR has approached 4.44, and it looks in this environment to be just a matter of time before the Malaysian Ringgit approaches 4.50. For the Indian Rupee, 80 is possible. And for USDZAR 20 is realistic

Emerging markets are also facing an episode of double trouble arriving from both world stock market volatility, as well as driving demand for the USD. The Dollar Index appears to be on the road to gradually advance to 105, which resonates to carnage for emerging markets currencies as well as the EURUSD, GBPUSD, AUDUSD and of course Gold. Questions do remain over how long the USD can remain above 100 for, although I do not think a direct intervention in the market is possible because this will risk spooking investors even further in a fragile environment.

EURUSD is at the time of writing valued 1.0684, although the situation in Italy and other EU nations that are progressing in a worse case suggests that only a significant decline in USD demand can prevent the Eurodollar falling towards January 2017 lows.

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Did the Fed Push The Panic Button to Avoid Another Market Meltdown?

For the second time in a matter of weeks and just days before the Federal Reserve were previously scheduled to announce the conclusion of its monetary policy meeting, another emergency US interest rate cut has been announced with the latest one hours prior to international financial markets opening for the new trading week.

One can’t help but wonder whether the Fed made this announcement on a Sunday shortly before international markets commence weekly trading to avoid another market meltdown for investors in stock markets.

Not only has the Federal Reserve thrown all of its tools out of the toolbox to help combat the economic pressures that the coronavirus will bring to the world economy, it has done so by firing all of its guns, grenades as well as bazookas at the problem. it can’t be helped to hold concern following this emergency move from the Fed to question what ammunition does the Fed have left to solve what will be a prolonged problem?

Nations around the world remain in the stage of announcing fresh control measures to prevent the spread of the coronavirus, and with cases still rising at an alarming rate the implications this will have on the world economy will naturally amplify. So investors will still demand more from central banks and world governments.

For this reason I don’t think what the Fed has announced will be enough for investors to buy back into stock markets. Volatility is moving at such an intense speed to coronavirus news that an investor can no longer expect for central bank decisions to remain current by the end of the same day, let alone in a week that has followed the sharpest declines seen in world stock markets since the global financial crisis.

The early aftermath of the Fed announcement suggests a weaker USD with both the EURUSD and GBPUSD advancing by close to 0.5% and just above 1%, respectively at time of writing but with the World Health Organisation announcing that Europe is now the epicenter of the virus these trends in FX remain at risk to living a very short shelf live.

Should central banks continue to announce emergency measures the impact it has on Gold price will be high on the radar of investors, and it should increase the probability of Gold pointing higher after it unexpectedly suffered its worst week since 1983 in the week prior.

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You Wouldn’t Catch A Falling Knife, Neither Should You Catch These Markets

Even following such dramatic drops, the selling isn’t over. This is clearly an enormously fragile environment for investors and just like you wouldn’t catch a falling knife, there isn’t reason to try and catch these markets either.

While the poker game between Saudi Arabia and Russia over Oil output will bear the blame for encouraging such a disaster in world markets, the performance of global assets over the previous fortnight have been showing signs of a sinking ship. The breakdown in the OPEC+ alliance with thanks to Russia, which was later retaliated by Saudi Arabia can be likened to ensuring the ship drowned faster and pushing everything else with it overboard.

If one were to look for a silver lining from an Oil price crash that took as much as 30% from its valuation within moments of the market open for the week is that it should have helped the commodity to find its bottom.

What this market really needs is a hero to save the day. And this hero isn’t global central banks coming to the rescue or authorities announcing more measures to contain the virus, but announcements from health authorities that a cure has been found to the virus or at least that the outbreak has peaked. Sadly the rising cases day by day rules the latter out of the equation. The villain to this story is the virus and the villain is only getting stronger, meaning the signposts remain unclear with dire clouds for investors to find their way back into stock markets.

The announcement late Monday evening from Italian Prime Minister Giuseppe Conte that strict measures will be extended to the whole country should also force the question to investors whether there is any justification in the EURUSD recent jump from 3-year lows at 1.07 to above 1.14. Should other nations in the European Union unfortunately suffer the same fate that Italy is currently dealing with, the Euro is looking at its most serious risk since the European Debt Crisis of 2012.

At this point, everyone would love the help of a crystal ball to help see what is next for financial markets. But in the form of the virus outbreak, we are looking at a world health disaster that still has the potential to spread further, before it gets any better.

I still hold hope that a global recession can be avoided but the previous week or so that has seen the virus reaching Europe and the United States, with infection cases still rising would overall increase the probability of a world recession.

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A Matter Of Time Before USDJPY Hits 100 as Gold Finally Reaches $1700

World stock markets have fallen at a sharp rate, with the Dow Jones Industrial Average expected to decline as much as 7% when the U.S trading session commences just minutes from now. This follows declines of 8% in the UK FTSE 100 and 5% in Japan’s Nikkei 225.

With an all-out price war in Oil between Saudi Arabia and Russia suggesting that coronavirus risks on the global economy are going to be magnified by an astonishing drop in Oil price, investors feel safer in this environment to stay away from riskier assets and turn towards safe-haven investments instead.

Gold is once again acting as the shining light and savior of investors with prices breaking above $1700 for the first time since December 2012. Where the opportunities still can be found is across Yen pairs, with the USDJPY plunging all the way to 101 from 104 so far today. The USDJPY in this environment can drop towards 100, and even 98 should the selling in world stock markets continue at the same type of pace to what has been experienced across the past few days.

Where this leaves the Federal Reserve is the major question on the minds of investors. Expectations are on the rise once again that the Fed will need to cut US interest rates as low as 0% within months, while announcing another round of Quantitative Easing is also appearing on the radars of possibility. Should this occur, the slump in the USD should pave the way for an even stronger EURUSD and GBPUSD.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

USDCNY Briefly Slips Below 7, 6.85 Can Be In Sight If Investors Cheer US-China Trade Agreement

The price of Gold slipped straight through $1500 to hit its lowest level so far in November around $1485, while the price of US Oil is nearing levels not seen in over two months after appreciating $3 since Friday of last week.

Broader risk appetite can also be noted across a range of asset classes, including US stock markets reaching new record-highs and commodity-linked currencies, such as the Australian Dollar approaching levels close to near 3-month highs.

In terms of emerging market trends seen in APAC, the Malaysian Ringgit (USDMYR -0.47%), Indian Rupee (USDINR -0.11%), Indonesian Rupiah (USDIDR -0.32%), Philippine Peso (USDPHP -0.24%) and Korean Won (USDKRW -0.15%) all benefited from coordinated attraction towards emerging market assets, and strengthened against the USD.

Of course there is no stronger proxy for how investors look at US-China trade tensions than the Chinese Yuan.

The Chinese Yuan managed to advance by 0.3% with the USDCNY at one point breaking back below the ever-important, and critical psychological support level at 7.

Hopefully a resolution to US-China trade differences will be found, and while we have been here several times in the past, if investors do hold faith that a trade agreement (that lasts) is in place USDCNY could potentially decline all the way to 6.85.

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Airbnb IPO Not Destined to be Pushed Back Like WeWork, Wall Street Sentiment Crucial Ahead of Launch

The shelved public listing has occurred at a similar time to the announcement that Airbnb is targeting a public listing for 2020, but it initially been met with curiosity that the fate of this launch will meet a similar path to WeWork. Although I don’t see the two cases as similar.

While the public offerings of other popular firms that emerged as a result of the boom in the technology sector, such as Uber have underwhelmed there shouldn’t be an association that a path of disappointment is ahead for when Airbnb goes public.

For one, the firm gets praise for its limited capital expenditure and that it has been profitable for the past two years running (2017 and 2018) with earnings before interest, taxes, depreciation and amortization (ebitda). With a valuation of $35 billion and $3.5bn of cash in reserves, rules out the possibility that its decision to go public is because the firm desires capital.

The growth of the business beyond the household brand that has been developed is equally as impressive. Annualised results for Q1 2019 show that its bookings grew by 31% to a value of $9.4 billion. These are all impressive readings and the incentive behind its decision to launch is related to the expiration of share offerings to its employees.

All of the above bode well for transparency. A novelty that investors cannot always enjoy when researching the state of the business in private companies, although there are some obstacles for Airbnb ahead. Regulation has been one of the sticky points for short-term rentals and this issue will pick up more momentum ahead. If those who rent out properties are in the future restricted to similar durations at the 90-days per year recently imposed in major cities (San Francisco) or required to provide more documentation on their earnings this risks placing a cap on the headlines that Airbnb has managed to reach 4 million listings in 191 countries worldwide.

There were several issues at WeWork that dampened investor sentiment. There wasn’t confidence that it was a profitable company, which served to raise even higher eyebrows when it declared a valuation above $40 billion. Its cost-base business model, which essentially underscores how much WeWork are required to invest to maintain the upkeep of its assets also weigh into how investors analyse its business model.

The timing of the WeWork launch, in hindsight is another matter that investors had to take into account. The OECD only revised global growth forecasts for 2019 to 2.9% last week, which is the lowest level of world growth since 2009 and doesn’t bring an aura of favourability to the commercial real estate sector.

When an economic slowdown occurs, it is only natural that a business will desire to keep their costs lower and this represents a cloud over the commercial real estate sector. WeWork offers attractive and flexible conditions for its tenants, but the impact a global downturn could bring to the commercial real estate sector, and whether it encourages corporations to pullback on costs is something that risks questioning the lifespan of WeWork customers.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

EU Data Rings More Alarm Bells for Global Economy While Thomas Cook, WeWork And Netflix Remain in Headlines

  • Netflix stock continues its decline since July
  • Volatile week ahead for Oil as geopolitical tensions heightens; UK Prime Minister also comments

Another round of astonishingly weak economic data out of Europe this morning has resulted in major markets across Europe trending lower, with the German DAX leading the line of selling with losses close to 1.6% at time of writing. The Euro Stoxx 50, CAC 40 Market Index in France and IBEX 35 Index in Spain have also recorded losses above 1%, while the FTSE 100 has declined 0.8%.

The most recent data out of Europe this morning has achieved little, and if anything has accelerated prolonged concerns over global economic weakness after German manufacturing activity declined to its lowest level since 2009 and the Manufacturing PMI for the Eurozone was announced at 45.6. This means that the sector has now remained in contraction activity for eight consecutive months.

The most recent data out of Europe will scream for further monetary stimulus support from the European Central Bank (ECB) although there is awareness that the ECB has stretched to its maximum to combat economic momentum. Deposit rates in Europe already stand at minus 0.5% following the conclusion to the latest ECB policy meeting and there is limited reason to believe that extending rates into further negative territory is the answer to the Eurozone’s problems after being held in negative territory for a five-year stretch.

EURUSD below 1.10, and it should remain there

The EURUSD has declined below 1.10 to its lowest level since September 11 on the EU data released this morning. The Euro should remain for an extended stay below 1.10 for a prolonged period, given the economic concerns and sentiment around Europe, and we should be looking at talking about the Euro potentially hitting 1.05 over the coming months.

This would be a more likely scenario if it wasn’t for the public knowledge and distress that the Trump Administration holds for strength in the USD. For the Euro to fall all the way to 1.05 over the coming weeks and months, hypothetically the USD Index would need to rally to levels not seen since March 2017, which stand at around 102.

Thomas Cook collapses after 178 years of operation

Another key headline out of Europe is the unfortunate demise of Thomas Cook, which confirmed its collapse in the early hours of the morning after rescue talks to save the 178-year old travel company failed.

This conclusion had been feared, but its impact on the travel industry will remain with around 150,000 holidaymakers stranded and up to 21,000 jobs now at risk. The quest to bring all the impacted holidaymakers home will be the largest peacetime repatriation and is expected to impact at least 150,000 people in the United Kingdom, plus many more outside the UK. The potential economic impact of the collapse will not be clear immediately, but it represents another sore spot for the Eurozone and even the economies such as Turkey and Tunisia, which all benefited from being destinations of holidaymakers.

Factors behind the demise of Thomas Cook will likely include ongoing competition in the airline industry and more recently issues such as devaluation in the Pound following the EU referendum in June 2016, volatility in Oil prices and global uncertainty. However when taking a look at the financial information of Thomas Cook over the past twelve years the UK’s oldest travel company has alternated between profits and losses since 2007.

There have been more losses than profits in the past twelve years and this suggests that the business model has suffered for more than a decade and current issues such as Brexit uncertainty and weakness in the British Sterling should not be provided as explanations behind why the company went under.

WeWork IPO shelved

Amid prolonged concerns over weakening global growth, endless uncertainty over issues such as Brexit and no resolution in sight to US-China trade disputes that only last week encouraged the OECD to revise global growth forecasts for 2019 to the lowest level since 2009, the public listing of WeWork has been delayed.

Why the IPO to the popular co-working company has been delayed is attributed to questions over its valuation, profitability and long-term business model. Although a clear link between decelerating global growth momentum, uncertainty over the commercial estate sector in light of a world slowdown and what impact the global environment could bring to corporations do provide other suitable reasons why the IPO faces delay.

WeWork offers attractive and flexible conditions for its tenants, but the impact a global downturn could bring to the commercial real estate sector, and whether it encourages corporations to pull back on costs is something that risks questioning the lifespan of WeWork customers.

When will Netflix stock find its floor?

The losses of over 5% in the Netflix stock as trading for last week came to a conclusion coincidently occurred at the same time customers of Apple queued for hours to get their hands on the latest iPhone. Doubts continue to hover over whether Netflix will be able to not only retain loyal customers, but grow their existing data base after Apple announced its own streaming service would cost only $5 per month, while Netflix will face additional competition from the upcoming launches of Disney+ and more in the future.

Upcoming competition to the streaming space is nothing new really for Netflix and those in the market have been aware of increased competition from the soon-to-come launches of Apple, Disney, ESPN+ and HBO Max for most of 2019.

Oil prices lose further ground, but comments from UK Prime Minister ahead of U.N assembly suggest increased volatility ahead

Reports that Saudi Arabia has already restored around 75% of the output lost due to strikes on its facilities just over a week ago has resumed further weakness in the price of Oil. Sentiment has not been helped from the latest economic data out of Europe and the impact this can have on global demand, although it is the ongoing tensions in the Middle East that are at risk of rising once more, and that should keep prices lively throughout this week.

Iran warned foreign forces to stay out of the Gulf this weekend, following the US announcement that it was deploying more forces to Saudi Arabia and the comments from UK Prime Minister Boris Johnson that there was a “very high degree of probability” Iran was behind the drone and missile attacks. Johnson also refused to rule out participating in a coordinated military response if requested, which will keep traders on their toes. The U.N General Assembly this week will risk highlighting more geopolitical implications for the region should warnings at Iran be aired, and geopolitical instability to a historically volatile region would risk additional shocks higher to the value of Oil.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Oil Surrenders Another 5% But With Pompeo Visiting Abu Dhabi and Jeddah, Investors Must Remain Diligent

with the commodity having declined a whopping 13% since the astonishing 20% climb in prices that made headlines around the world when financial markets resumed trading for the new week.

The main catalyst behind the losses on Tuesday were reports that Saudi Arabia will be able to resume production output close to levels expected prior to the attacks on Aramco production fields last weekend. While initially met by astonishing surprise from investors who expected the return to capacity would take months, this was later supported by Saudi Energy Minister Prince Abdulaziz bin Salman confirmation during a news conference in Jeddah that Saudi’s oil output will be fully back online by the end of September.

More optimism that production output will return to levels before the drone and missile attacks on Saudi Arabia before the end of September should encourage further declines in oil by the end of the week. It wouldn’t surprise me if Brent Crude prices edge closer to $60 from current valuation near $64 at the time of writing, while WTI Crude can fall as low as $56 from where it trades currently, marginally below $59.

The next focus for investors monitoring the geopolitical environment is the expected press conference from a Saudi Defence Ministry spokesman later on Wednesday. Reports have circulated that the press conference will show evidence that Iran was involved in the Aramco attacks, while United States Secretary of State Mike Pompeo is also traveling to Abu Dhabi and Jeddah.

If evidence of Iran’s suspected involvement in the attacks on Saudi Arabia is provided and the US Secretary of State warns of repercussions, fears regarding a surge in political tensions in the region will escalate once again. While we have already seen in the past few days how sensitive oil prices can behave to geopolitical developments, if an escalation does flare up in the region, volatility can spread into other asset classes.

I myself will closely monitor the behavior of Gold, which has performed with unusually low levels of volatility since the events broke out this past weekend.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Time to Expect a Jump to $60 in WTI Oil?

This view is encouraged by concerns that the attacks on Oil plants might provoke an intense escalation in a region that is already sensitive to geopolitics, but it is still not clear what caused these fires and how this happened, before deciding into a portfolio what impact this could have on valuations.

US WTI concluded the week just below $55 and to expect a move to $100 from here is ambitious, though confirmation that it will take weeks, and not days to replace this removal of Saudi production can encourage a move to $60.

Looking at the technicals on the Daily charts, Oil prices have suffered more than 3 days of successive declines and found short-term support at $54. As long as prices do not fall below $54 we can look for a rebound from recent declines.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

More Reason for The ECB to Cut Interest Rates?

Global economic health fears are once again making the rounds, following confirmation that the German economy contracted in the previous quarter. This follows the UK GDP contraction at the end of last week, meaning we are now looking at increased prospects that two of the largest advanced economies in the world will enter a technical recession over the coming quarter.

It wasn’t just economic data in Germany that disappointed from Europe today. GDP in the Eurozone expanded by only 0.2% in the last quarter, half of the size of growth seen in Q1 2019 and world recession fears have been further compounded by the U.S. 2-year and 10-year treasury yield curve inverting for the first time since 2007.

The alarming data in recent days essentially compliments the view that has been steadily growing in recent months – the world economy is encountering another slowdown.

The EURUSD has fallen as much as 60 pips at time of writing and eyes will be on whether the pair will drop below 1.11, which would be seen as a signal that 1.10 is once again in reach for the Eurodollar.

It is the Japanese Yen that is once again an investor favorite as a safe haven. The USDJPY has dropped as much as 110 pips with eyes now on whether the pair can slip below the 105 psychological support level.

EURJPY has lost 140 pips. If the current selling momentum in the pair pushes below 117.50, the cross will have achieved its lowest level since April 2014.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

USDJPY: The Path to 100 is Clearer Than a Move Above 112

There are multiple questions to consider when determining the fortunes of the Japanese currency and its US counterpart. Will the Federal Reserve cut US interest rates by up to 50 basis points in July? Is the Trump Administration steadily influencing the monetary policy stance of the Fed? Will President Trump fire/replace Fed Chair Jerome Powell? Will US-China relations follow a similar path of deterioration as H1 2019? Will the universal slowdown in economic data lead to another global downturn? Could the brewing war of words between the United States and Iran escalate into a conflict? And, what if Boris Johnson, upon winning the contest to become the next UK Prime Minister, sticks to his guns and leads the United Kingdom into a no-deal Brexit on October 31? Will such an outcome precipitate another plunge in Sterling and lead to a spectacular period of weakness for global markets?

Extended period of market uncertainty needed for USDJPY 100

Anyone or a combination of the above would lead to a prolonged round of market panic and will send the USDJPY lower as safe-haven demand for the Japanese Yen escalates. An extended period of market uncertainty would be needed for USDJPY to fall below 100 for the first time since Q2 2016. The January “flash crash” low of 104 is the current line in the sand for the coming months, but 104 will not act as solid support for the pair, should the Yen further its 2.7% Q2 advance against the greenback.

Another turn for the worse in US-China trade sinks USDJPY

The United States and China trade saga has extended into the second half of 2019 and investors have rushed into stock markets once again on optimism that central banks will come to the rescue with yet another round of monetary easing.

Be careful of this narrative. A resolution to the US-China trade standoff would dampen expectations that the Fed will cut US interest rates and push investors to take profit from the stock rally that has carried US valuations back towards record highs. The Dow Jones and the S&P 500 jumped above 14% and 17.35% respectively in H1.

Another wrong turn in US-China relations will prompt the Federal Reserve to cut US interest rates again, as it becomes clearer that US-led protectionist policies are denting the world’s biggest economy. Economic weakness in the United States and the Fed bowing to investor expectations of lower US interest rates will squeeze the Dollar more than the 1.6% drop it suffered in the month of June.

USDJPY buyers need Fed to disappoint investors by holding back from lower US rates

What potential USDJPY buyers need to see is positive geopolitical news, the key one being the US-China trade war. If the two nations do finally agree to new trade terms, or at least a prolonged truce on new tariffs, a worldwide relief rally would shove both the Yen and Gold from their pedestals as beneficiaries of safe-haven buying.

A global stock market surge on positive US-China newsflow can take the USDJPY back towards 110, but the Federal Reserve would need to delay its recent tone that it is approaching one, or several, possible US interest rate cuts in the next six months for the USDJPY to extend above 110 and back to its current 2019 high at 112.

Written by Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM