Currencies

Dovish Powell bullish for Euro

The pair saw some downward pressure on better than expected US NFP data and worse than expected Euro area macro data outcome. Market continues to receive positive influence from Chinese central bank’s monetary policy easing which is further supported by positive sentiment surrounding investors’ hopes of favorable outcome in Sino U.S. trade talks which is seeing first face to face interaction post President Trump & Xi Jing Ping’s agreement last month during G-20 summit for a 90 day pause to ongoing tariff war between them. Last week, Fed Chair Jerome Powell state that rate hike plans for 2019 are not fixed and could change based on macro data outcome & economic scenario signaling that Fed is ready to pause rate hike if needed boosted equity market performance and also added substance to increased risk appetite which market is experiencing.

Bearish Bat Pattern Completion

The Bat pattern is similar is a retracement and continuation pattern that occurs when a trend temporarily reverses its direction but then continues on its original course. The Harmonic Pattern Bat is made up of 5 swing points, X, A, B, C and D.

·         AB leg can retrace between 38.2% – 50% of XA leg

·         BC leg can retrace between 38.2% – 88.6% of AB leg

·         CD leg can retrace up to 88.6% of XA leg

·         CD leg can also be an extension of between 1.618% – 2.618% of AB leg.

Currently USD/CAD has completed the D point and can fall from here.

Bounce from 70.7 Fibonacci level

The New Zealand Dollar went on a roller-coaster ride before settling higher last week. The Kiwi was hit by a “Flash Crash” early Thursday. The NZD/USD rallied on Friday to finish the week higher in response to Federal Reserve Chairman Jerome Powell’s dovish remarks on central bank policy. On Friday, China jump-started the Aussie and Kiwi rally when it confirmed it would hold vice-ministerial level trade talks with the United States in Beijing on January 7-8. The NZD/USD will rally this week if the U.S. Dollar continues to retreat due to Powell’s dovish comments. Increased demand for risk will be another bullish factor driving the Aussie and Kiwi higher. Gains could be limited if Treasury yields rise too rapidly. During the week investors should pay close attention to the slew of Fed speakers. We want to see which speakers agree with Powell, and which see things differently. This should create some volatility. If all agree with Powell then this could mean the Fed will refrain from making any rate hikes in 2019.

Equities

US-China trade talks remain on track

Stocks were boosted by a variety of catalysts including signs that the US economy is still robust via the monthly nonfarm payrolls release, a suddenly attentive Fed which seemed to be signaling the possibility of slower rate hikes and US-China trade talks that remain on track. Risk appetite got a huge boost on Friday when the U.S. payrolls report showed 312,000 net new jobs were created in December, while wages rose at a brisk annual pace of 3.2 percent. Despite the strength, Fed Chairman Jerome Powell sought to ease market concerns about the risk of a slowdown, saying the central bank would be patient and flexible in policy decisions this year. These factors are definitely positive for the stock markets.

A stock for long term

The parent of Google remains one of the best megacap growth stories, thanks to a dominant and lucrative search-advertising platform. The company (ticker: GOOG), which also owns YouTube, Android, and a cloud-computing business, has defied the law of large numbers. It continues to record quarterly revenue growth of 20% or more, despite a large annual sales base of more than $100 billion. The stock, looks reasonably priced at 23 times projected 2019 earnings of $47 a share. The price/earnings ratio overstates Alphabet’s valuation because the company sits on $102 billion of net cash, or about $145 a share. We are bullish on the shares for the medium term

Metals

Prices above 200 WMA

Gold extends the rally from the end of 2018, with the price for bullion quickly approaching the June-high ($1309), and current market conditions keep the topside targets on the radar as the precious metal extends the series of higher highs & lows from the previous week. The weakening outlook for the world economy seems to be spurring a flight to safety as global equity prices remain battered. Moreover, it seems the bullion will continue to benefit from the U.S. government shutdown as the ongoing deadlock in Congress saps bets for an imminent Federal Reserve rate-hike, and the central bank appears to be on track to conclude its hiking-cycle in 2019. Multiple macroeconomic factors are supportive of higher gold prices for the first time in years: the uncertainty over interest rates and monetary policy, the trade war with China, Brexit, and slowing global growth.

Energies

Production downgrades to lift prices

Australia has lowered its wheat production forecast by 11% to the smallest in a decade amid a crippling drought across the country’s east coast that may cut exports from the world’s fourth biggest supplier. Australia typically exports two-thirds of its wheat, but with dry weather hampering local production demand from domestic millers will supplant major customers such as Indonesia. Meanwhile, The EU total grain crop forecast for 2018 has been revised down by almost 2m tonnes by European grain body COCERAL. The wheat crop was reduced from 129.9m tonnes to 128.6m tonnes, lower than the 141.9m tonnes reached in 2017. We believe Wheat prices will go up as a result of production downgrades.

Supply cuts & U.S-Sino trade hopes support prices

While oil traders continued to monitor developments in U.S.-China trade talks, supply levels also captured market attention after signs of falling supply last week supported prices. The Organization of the Petroleum Exporting Countries cut crude output in December, a Reuters survey showed, and the American Petroleum Institute reported a 4.5 million-barrel drop in crude inventories. Oil prices received some support recently as supply cuts announced by the global coalition of producers known as OPEC+ kick in. OPEC, Russia and other non-members agreed in December to reduce supply by 1.2 million barrels per day (bpd) in 2019. OPEC's share of that cut is 800,000 bpd.

 

Source: Matrix PR