Currencies

Dollar buoyed by hawkish Fed

Euro ended the week on a lower note as data from Eurozone i.e. consumer confidence, Manufacturing PMI, Services PMI and Core came in below expectations and as anticipation over the future rate hikes from the Fed began to gain in credence. Eurozones annual inflation rate came in at 1.3% in January 2018, down from 1.4% in December 2017, which prompted Eur/usd to shed further ground. In the coming week, ECB President Draghi is supposed to testify before European Parliament Economic and Monetary Affairs Committee on Monday and also the new Fed Chief Powell is set to testify which would also give indication on the future plans of ECB. Moreover, the dollar remains supported as markets continue to price in the odds of the Federal Reserve raising interest rates four times over the course of 2018. With US GDP around the corner and increased expectation of rate hike, euro will take take a breather.

Strong weekly downtrend

The GBPUSD pair ended the week below the 1.40 region as the focus of the week was clearly on the dollar as it was buoyed by a hawkish Fed. Uk's Q4 GDP data was revised lower, this brought the annual GDP in the UK to 1.4% for the year, missing estimates of 1.5%. The business investment for the quarter was also revised displaying a flat print, compared to the initial estimates of 0.5%. In the upcoming week, speculators will watch closely for further clues on Brexit related facets ahead of UK PM Theresa May’s speech next Friday on ‘Road to Brexit’. We are also going to see the new Fed Chief Powell testify this week and with US GDP around the corner, pound will find it difficult to survive the dollar storm.

Bear Butterfly Pattern

The Bear Butterfly Pattern is a reversal pattern composed of four legs, marked X-A, A-B, B-C and C-D. The pattern is a reversal pattern that allows you to enter the market at extreme highs and lows. It helps you identify when a current price move is likely approaching its end. This means you can enter the market as the price reverses direction. Using Fibonacci levels applied from point X back to point A, point B is formed at 0.786. To find point C, the Fibonacci levels from point A to point B are inserted and point C will be formed between 0.382 or 0.886 Fibonacci ratio of the AB leg. Once point C is formed, D is approximate 1.618/2.618 of BC or it can be 1.27/1.618 of XA. As the pattern is completed at point D or the zone in which reversal may occur, one can start taking the position as the trend is set to change.

Equities

Strength in upward momentum to continue

Financial markets have been on a roller-coaster ride, with investors worrying that rising wages will result in higher inflation which will lead to a jump in interest rates in the U.S. A few turns higher in volatility as measured by the VIX, triggered short-lived panic selling but similar to last week traders were prepared to buy the dips. This helped the US benchmark indices score a second weekly gain suggesting that the recent selloff was a correction and not the start of a prolonged bear market as some had initially feared. Falling bond yields also seemed to have supported sentiment on equities, as 10-year yields eased from a four-year highs. Moreover, companies have been reporting robust results and are predicting solid earnings and sales for the rest of the year, thanks to newly implemented corporate and personal tax cuts. This should continue to support the market. For the Dow Jones industrial average, 25,000 was considered as a large psychologically significant number with a lot of resistance, and since the index ended above 25000 consecutively for the past two weeks, this suggests further uptrend.

Exports drive German growth

Foreign trade drove a 0.6 percent expansion in Europe’s largest economy between October and December and the momentum from the fourth quarter is widely expected to carry over into the start of 2018. The data confirmed that German economy ended last year on a strong footing despite unaccustomed political uncertainty in a country that prides itself on its stability. The flourishing economy helped the overall state budget surplus hit 36.6 billion euros ($45.07 billion) in 2017, its highest since reunification in 1990. German equities are a good long term buy. considered as a large psychologically significant number with a lot of resistance, and since the index ended the week above 25000, this suggests further strength in uptrend.

A good bet on China’s education sector

Education is hot in China as the country's tiger parents push their kids hard to excel academically in the hope of getting into top universities and gaining an advantage in a very competitive jobs market. There is plenty of room for growth over coming years given the size of China's population and demand for good education. They especially like K12 after school tutoring (AST) given the large size of the market, its rapid growth and fragmented nature of the industry. TAL is in the sweet spot in China’s fast-growing education market. Its strong position in K12 after school tutoring is attributed to its reputation for quality services that produce top-scoring students. TAL’s fast growth is driven by aggressive capacity expansion and strong student enrolment. Revenue and non-GAAP EPS are expected to grow at a 3-year CAGR of 43.7% and 46.4% respectively during FY17-20.

Buy the global cosmetics leader

L'Oréal is the biggest player by sales in the global cosmetics industry and this dominant position leaves limited room for any disruption to the underlying business. This is one industry that is not susceptible to online retailing. L'Oreal gave strong Q4 results and posted a 5.5 percent rise for like-for-like sales during the fourth quarter, 50 basis points above consensus of 5 per cent. The company is confident of significant growth in like-for-like sales in 2018. L’Oréal’s sales are geographically diverse, with Western Europe accounting for 36% of annual revenue; North America contributing 25%; and Asia-Pacific, 21%. The remainder comes from Eastern Europe, Latin America, Africa, and the Middle East. Shares are at trend line support and are good for long term.

Metals

Rise in yield take the lustre off gold

St. Louis Fed President James Bullard tried to tamp down expectations of four rate hikes in 2018. Instead of the widely anticipated three increases, Bullard said policymakers need to be careful not to increase rates too quickly because that could slow the economy. Gold has fluctuated in two directions this month as investors fretted about how fast the Fed might raise rates after official data showed a pick-up in U.S. inflation. Fears of inflation boost gold, which is perceived as a safe haven against rising prices. But hikes in interest rates to fight inflation make gold less attractive since it is not an interest-yielding investment. Gold is currently in a downtrend according to the daily chart. A trade through $1322.00 will indicate the selling is getting stronger. The short-term range is $1304.00 to $1362.40.

Fed Chair Powell is due to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee on Tuesday which can also give the indication of future rate hikes and balance sheet reduction.

Energies

OPEC's objective supports prices

Oil prices rose last Friday to its highest in more than two weeks, supported by the shutdown of the El Feel oilfield in Libya which typically produces about 70,000 barrels of crude per day and upbeat comments from Saudi Arabia that an OPEC-led effort to cut stockpiles is working. U.S. crude inventories unexpectedly fell 1.6 million barrels last week as net imports dropped to a record low and exports surged, while inventories declined further at the key storage hub in Cushing, Oklahoma, according to data from the Energy Information Administration (EIA). Coming into the next week oil prices may soon get yet another boost if the U.S. applies sanctions on Venezuela in response to President Nicolas Maduro’s calls for a snap election. The Baker Hughes oil rig count added rigs for the 5th straight week which were 799 vs 798 previous 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.

 

Source: Matrix PR