Currencies

1.2100 a critical resistance level

The euro concluded the 1st week of 2018 effectively where it started, but what should make the bulls happy is the fact that it managed to end the week above 1.20, which should give them a lot of hope for the coming week. We had a range of data from the US with the manufacturing PMI data and the ADP employment report coming in stronger than expected. The NFP came in weaker but there was a revision higher in the data from previous month which helped the dollar to be steady and pushed the euro lower to end the week just above 1.20.

From the US, we have the PPI, inflation data as well as the retail sales data next week, which should reveal the strength of the US economy and also hint at the timeline for the next rate hikes from the Fed. EUR/USD will need to break above 1.2100 inorder to rally higher.

Risk on move to support USDJPY

Despite last week’s unfavorable US unemployment claims, the dollar managed to sustain the current support level. US dollar fell during most of the week, but then turned around to rally significantly and forms a hammer. The hammer of course is a very bullish sign, and a break above the top of that hammer should send this market higher. It’s not until we break down below the 110 level that uptrend is under threat .Eventually buyers will be attracted to this market based upon a risk on move in the stock markets. There will be headline risks of course, as the Japanese yen tends to be picked up when people are concerned, but those should be short-term moves.

Equities

Strong foreign demand propelling growth activity

It is a heavy week ahead for Germany. We have important economic data, ranging from Factory Orders to Trade Balance reports to German Bond Auction expected at the start of the week. The factory orders are expected to reflect strong foreign demand propelling growth activity to a record high. IHS Markit’s Purchasing Managers’ Index (PMI) for manufacturing accounts for about a quarter of the economy. In the previous months, this data showed a jump to 63.3 from 62.5. We expect the risk sentiment to continue to improve which should help the DAX move higher and challenge the psychological resistance region around 13500 during the course of the week.

The index has broken the bull flag

The Dow broke the 25,000 benchmark for the first time on Thursday, and with Monday being a new years’ day holiday, it was the strongest 1st four days of trading to a year in more than a decade. For the Dow, it was the best start since 2003 and for the Nasdaq and S&P 500 it was the best since 2006. Markets still seem to be working to figure out the tax cut implications, and that's provided some of the boost along with already strong economic forecasts. With the world's largest economies all growing strongly at once and central banks moving slowly to tighten policy, investors have poured their money into risk assets. Technically, the index has broken the bull flag and has the potential to surge high to 25435 levels.

Halliburton benefits from improved utilization and pricing gains

It is halleluiah for oil related stocks. After a year of remaining under pressure due to oversupply and all time low prices, Crude prices have finally found their ground. While that’s true for all oil stocks, Halliburton has performed better than its peers (while the industry was down 22.4% in 2017, Halliburton was down only 9.8%). It is one of the world’s best oilfield services provider, and has a streak of beating earnings estimates quarter after quarter. Halliburton has benefitted majorly from improved utilization and pricing gains in North America and its ability to maintain low cost solutions through slump oil prices. Technically, we believe there is ample of upside potential in this stock. Currently, there is a bear crab formation underway, with an expected immediate upside target of $53.12.

Renewed confidence in automobile sector

European automakers are witnessing a good time on renewed investor confidence backed by sustained demand in North America and Europe.Peugeot announced on Friday that it plans to hire 600 production workers at its Hordain plant in response to strong demand for its Peugeot Expert and Traveller, as well as its Citroen Jumpy and SpaceTourer models.

We believe that Peugeot’s earnings will be driven by three pillars: 1) improved pricing power on the discontinuation of non-profitable models and a gradual recovery in the European car market; 2) higher European capacity utilization, which has risen from 72% in FY13, to over 90% in FY16; and 3) strong incremental cost savings, driven by purchasing bill reductions, reduced labour costs and synergies from cooperation with GM. Further, we believe that strict control on working capital and sensible capex spending should result in cash generation.

Metals

Global equities rally to reduce safe-haven demand

Astonishingly, Gold Prices have rallied by more than 7% during thelast 3 weeks and despite last week’s unfavorable US data regardingUnemployment Claims, dollar was able to sustain the support levels.The fundamental rationale for holding its support level could beattributed to the global complacency over trajectory of US rates whichmight come faster than the market expectations. This could impedethe ongoing rally in precious metals. Further the phenomenon of asoaring Global Equities Market makes an investment in a safe havenasset unlikely.

Energies

Good Asian monsoon expected to raise output

Analysts have raised the production prospects for sugar in India and Thailand. It is attributed to a very good monsoon season in Asia which has raised the global output forecast. The strong production should weaken the pricing powers of producers, meaning less competition amongst the buyers for supplies.

Green Pool hinted at the potential for sugar price weakness as it lifted to a 15-year high its forecast for the extent of supplies of the sweetener. The Australian-based analysis group raised by 629,000 tonnes to 10.43m tonnes its forecast for the world sugar production surplus in 2017-18 - while reducing by 664,000 tonnes to 1.11m tonnes its estimate for the output shortfall last season.

The impact of the revisions brought a watershed boost to inventory expectations, with Green Pool saying that current estimate for the surplus for 2017-18 is now more than the sum of the 2015-16 and 2016-17 deficits

Oil bulls ready to maintain their uptrend amid growing volatility

Last Friday witnessed a few profit booking edging the oil price lower; prices are still up 2% this week with the uptrend expected to continue. Prices were unable to hold above the 62-handle, despite solid demand for crude oil by refiners. Refiners are operating at elevated levels as higher than average crack prices are outperforming during a period that seasonally sees margins decline. With the east coast experiencing a cyclone bomb and both the mid-west and east coast experiencing frigid temperatures demand for heating fuels is soaring higher. Technically, there is a resistance extended by the 2015 high at $62.58, but the strong demand outlook is expected to boost prices further up once the resistance is broken.

 

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