Weak data from the USA, oil in danger and pound under pressure

May 16, 2019

Yesterday’s data on US retail sales could be described as weak only. Sales dropped 0.2% in April (with growth forecast at 0.2%) therefore the dollar has suffered sales.

We recommended looking for points for selling the dollar yesterday because the afore-mentioned scenario was considered as fundamental one. Our position is unchanged – we short the dollar. First of all against the euro and the Japanese yen. Perhaps the Canadian dollar could be added. Inflation data came out.

The reason to hope for less aggressive rhetoric from the Central Bank of Canada has been given by inflation data on Canada.

Another data that came out yesterday was the statistics from China. The figures also frankly did not please: industrial production, retail sales and investment growth rates - all indicators appeared much worse than expected. That only assured investors that the world economy will slow down further, and the trade war is - a real evil.

Meanwhile, the pound continues to be under pressure. The basic reason is the same - Brexit. The government is not able to get on well with Labor. This means that the vote on the updated Brexit plan, scheduled in the House of Commons for the first week of June, may fail once again. Our position is to refrain from buying the pound. By “goodbye” we mean the appearance of clarity in Brexit situation. Given that the potential of pound growth is measured in hundreds of points, it is better to receive less than 100-150 pounds of profit but to enter consciously and surely.

Meanwhile, tectonic shifts are possible in the oil market in the near future. The point is that OPEC + is coming to an end. And the decision to extend it is still far from being made. This weekend will be held negotiations of OPEC +. According to rumors, Russia is ready to support the increase in oil production. Given that Saudi Arabia, in general, has similar desires, there is a reason to think that OPEC + will cease to exist, or at least, the size of production cuts will be revised to a significant decrease.

For oil, this means one thing - a reason for a medium-term downtrend formation. So we recommend starting selling oil now, while it costs so much.

Our trading plan for today: we will look for points for buying the euro and the Canadian dollar against the US dollar, sale oil, and the Russian ruble, buy gold and the Japanese yen.