Currencies

Pair near strong weekly resistance

EUR/USD pair has been rallying extensively over the past few weeks, and even the aggressive comeback by US dollar didn’t seem to reflect much in this pair as it did in other currency pairs. However, that seems to be in corrected in the week ahead, as the pair is in close ranges to a 2008 trend line resistance. On the US front, the US economy added 200K jobs in January and more importantly, saw wages rise by 2.9% y/y, in what seems like a more sustainable acceleration in pay. This sent the dollar higher after a week that saw it struggling to recover. On the week ahead, we have US ISM Manufacturing PMI, which stood at the levels of 55.9 in December. A rise to 56.5 is expected, which if reached will indicate string economy and growth, which could burden EUR/USD.

Breakout on the upside

Technical analysis on the weekly chart shows a breakout on the upside. The British pound initially fell against the Japanese yen during the week but found enough buying pressure to turn things around and form a very bullish looking candle. The breakout is above a shooting star formation, which renders more strength to the bullish outlook. The Yen will experience pullback if the Equity markets start to rally. Given the stumble in equity markets last week, bulls are expected to take over the cheap prices. If that happens, Yen will definitely be under pressure. British Pound even on its own looks pretty strong. Given these reasons, we expect this cross currency pair to continue going up.

Equities

Buying Opportunity amidst Selloff

US 30 tumbled 4.1%, to 25,520.96 last week, its largest percentage decline in more than two years. Ultimately, though, we’re betting that the pullback ends up being one to be bought, not sold—and it all goes back to economic data. For now, there’s no sign of a recession—the one thing almost guaranteed to cause a bear market. Companies have been predicting solid earnings and sales for the rest of the year, something that should eventually support the market, too. 25,000 is a large, round, psychologically significant number, and of course an area that was previous resistance. A bounce from there would make a lot of sense.

Australia negative on bearish iron ore

The global iron ore industry is starting to experience a fresh drop in prices that has analysts trying to decide whether this is the start of a deeper downtrend or a pull-back. The Australian government said earlier this month it expected a 20% decline in iron ore prices this year, hurt by rising global supply and cooling demand from China. Experts at UK-based research and consultancy group Wood Mackenzie say whether the current reverse becomes a rout or not, iron ore’s near future is not looking good. The new emission license and environmental tax law that came into force in China this month will put further pressure on steel mills to fully comply. Rising bond yields could cause a drastic fall in commodity prices and this could negatively impact the outlook of index.

Robust earnings to drive prices

Amazon.com reported the largest profit in its history of nearly $2 billion, on 1st Feb 2018, as the online retailer attracted millions of new customers to its Prime fast-shipping club for the holiday season and as the new U.S. tax law boosted its bottom line. Amazon’s net income more than doubled to $1.86 billion, or $3.75 per share in the fourth quarter ended Dec. 31. 2017 with the Amazon Web Services (AWS) cloud division helping to propel numbers. Amazon initially inched higher on back of robust results, however given sell off in equity markets, it ended up in the red. Amazon received a slew of upgrades from majority of the analysts on Wall Street after delivering up beat earnings. We believe this should further propel buying interest in the stock and the dip late last week is a very good buying opportunity.

Metals

Inflation to spur gold prices

Gold prices took a hit late last week, when the US Labor Department reported better-than-expected employment and wage data. The US Treasury yields breached above 2.7% levels on upbeat US data, pressurizing Gold. The price of the yellow metal has come down since, and currently trades at cheap levels of 1331.97. We expect the prices to trade under pressure but recover by the end of the week amidst uncertainty in the equity markets. The solid uptick in average hourly earnings and consistent growth in of the global commodities index, hints towards inflation rising, which could help counter the slump Gold prices as well.

Energies

OPEC commitment supports prices

OPEC is likely to keep its output limits in place, even as crude stockpiles return to the five-year average, which is the goal of its output deal. At the same time, U.S. shale drillers won't be able to meet all the growing demand. Many U.S. drillers and oil majors have vowed to focus on efficiency and fiscal discipline at the expense of runaway production growth. A bottleneck is forming in the oil services sector, particularly for the crews and equipment that perform hydraulic fracturing. The process of injecting water, sand and chemicals into wells to free oil and gas from shale rock formations has fueled a boom in U.S. output and helped the nation top Saudi Arabia as the world's second-biggest crude producer, after Russia. We believe this should turn out to be bullish for Oil prices.

Sugar near support levels

Last week we saw Sugar prices hovering around a range of $366 - $355, bracing ahead for the Dubai Sugar week. World’s largest port based refinery has reduced the production output ahead this year to 1.4 Million metric tonnes from a record output of 1.8 Million metric tonnes in the previous year as confirmed by Mr. Jamal Al Ghurair , Managing Director of Al Khaleej at the Sugar White Conference . Further added to his statement that lower sugar white premiums is causing refineries to slow down production even causing some of them to shut down . Along with this INTL FCStone forecasts a drop of 10% to 32.4 Million tonnes in Brazilian Centre South sugar output in 2018-19. All of these factors may cause a surge in the sugar white prices in the upcoming week.

 

About Century Financial Brokers

Established in 1989, Century Financial Brokers L.L.C.is the region’s leading financial brokerage firm and a well reputed online trading service provider in the United Arab Emirates. Since inception, Century continues to have a strong commitment and dedication towards providing superior and personalized customer experience, and empowering its customers through education, training and support, in line with the values and beliefs of its founder, Mr. Sulaiman Baqer Mohebi, a dynamic and visionary business leader.

Century operates on the world’s leading platform which also provides a wide-range of financial instruments, covering 6 asset classes, across 100 markets worldwide with products ranging from Currencies, Commodities, Indices, Metals, Energies, and Inter-Bank Money Markets for both local and expatriate investors, to meet their diverse trading and investment needs.

 

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