Currencies

JPY to lose safe haven demand

Improved market and investor optimism backed by positive Sino-U.S trade suggestions saw global equities rally and safe haven currencies, like the yen, edge lower on suggestions that the U.S is considering reducing some tariffs on China during the negotiations as a way of getting more in return. USD was poised for its first weekly gain in four weeks as there were reports overnight suggesting that Treasury Secretary Steven Mnuchin was in favor to ease China tariffs. Even though the U.S Treasury denied the reports, the fact that the idea was floated has many believing that the Trump administration is keen for trade solution sooner rather than later to aid financial markets

AUD poised for a rally

The Australian currency is very undervalued at these levels. We expect the U.S. and China to come to a resolution on their trade tensions, which would leave the Australian dollar very well positioned for a rally. The currency Down Under is often seen as a gauge of global risk appetite. In some cases, it is also viewed as a proxy for China, especially since the Chinese yuan doesn't trade freely. With the possibility of a trade resolution high, we expect risk on currencies like AUD to rally.

New Zealand economy to underperform

New Zealand economy grew at its slowest rate in nearly five years as weaker construction activity and food manufacturing dampened modest gains in other areas. Official figures show Gross Domestic Product (GDP) rose 0.3 percent in the three months ended September, compared with one percent growth in the previous quarter. The annual rate slowed to 2.6 percent from a 3.2 percent. Meanwhile, Oil prices hit a roughly two-month high on Friday, rising with the stock market, on news that China has put forward a plan to eliminate its trade surplus with the United States. This should boost CAD. We expect NZD to fall against CAD.

Equities

France to rally on trade thaw

French stocks are likely to rally as investors cheered a solid start to the U.S. corporate earnings season as well as signs of progress in U.S.-China trade talks. There is anticipation of a thaw in the China U.S. trade war amid reports that U.S. officials are debating lifting tariffs on Chinese imports to give Beijing a reason to make deeper concessions in ongoing trade talks. As the protests in France ebb, we expect French equities to rally.

Strong revenue growth supports Square

Square Inc is showing strong revenue growth and is expected to continue the momentum. In the third quarter of 2018, total net revenue grew 51% year over year and Adjusted Revenue grew 68% year over year, compared to 48% and 60%, respectively, in the second quarter of 2018. Gross Payment Volume (GPV) was $22.5 billion, up 29% year over year. GPV from large sellers grew 41% year over year and accounted for 52% of total GPV, up from 48% in the third quarter of 2017. The current share price is a great opportunity for long term investors.

Metals

Easing of tensions bearish

Improved risk sentiment, backed by positive Sino-U.S trade suggestions, has the USD poised for its first weekly gain in four weeks. As a result, prices of safe haven assets like gold have eased as risk sentiment gets a leg-up from hopes of progress in U.S-China trade talks. This has helped to unwind a percentage of the safe-haven trades and put pressure on gold. $1290-1300 area is turning out to be a major resistance level for gold as for past 3 weeks it hasn’t been able to move beyond these levels.

Energies

Global cotton stocks low

The International Cotton Advisory Committee recently released its harvest forecast for the 2018-19 season. Global cotton production is expected to decrease 2 per cent this year to 26.1 million tonnes, despite increases for the two previous seasons. The USDA estimates that China will have around 30 million bales of cotton at the end of 2018/2019 season, less than half of the 65 million bales during its peak. The reduced cotton stock in China is very positive for prices going forward. For years, high Chinese cotton stock had been acting as an albatross around the neck of cotton price. We expect Cotton prices to rise from current level.

Trade optimism to aid demand

Oil prices have rallied over +1% overnight after an OPEC+ report showed its production levels fell sharply last month, easing fears about prolonged oversupply. Also aiding crude prices is trade related optimism. OPEC+ indicated yesterday that they had cut oil output sharply in December 2018 before a new accord to limit supply took effect on Jan. 1. This would suggest that the main producers have made a strong start to avoid creating a supply glut in 2019. In its monthly report, OPEC’s oil output fell by -751K bpd in December to +31.58M bpd, the biggest month-on-month drop in 24-months.

Instrument

Comment

Strategy

Entry

Target 1

Target 2

Stop

USD/JPY

JPY to lose safe haven demand

  Buy

109.80

111.30

112.45

107.60

AUD/USD

AUD poised for a rally

  Buy

0.7166

0.7245

0.7355

0.7040

NZD/CAD

New Zealand economy to underperform

  Sell

0.8934

0.8855

0.8710

0.9080

Gold

Easing of tensions bearish

  Sell

1280

1265

1251

1303

Cotton Mar 19

Global cotton stocks low

  Buy

73.85

75.90

78.90

70.60

Crude Oil West Texas Mar 19

Trade optimism to aid demand

  Buy

53.94

55.60

57.80

51.20

France 40

France to rally on trade thaw

  Buy

4875

4955

5020

4750

Square Inc

Strong revenue growth supports Square

  Buy

72.23

74.90

78.70

68.00

 

Source: Matrix PR