What is behind the gold and oil growth & Powell again signals

12 Tem 2019

Perhaps the main event that jogged financial markets and had effected on the momentum of oil prices valuations, as well as gold prices, was an incident in the Strait of Hormuz. This time the United Kingdom and Iran were involved. Three Iranian warships tried to block the passage of the British company BP tanker. A British warship offset the attempt, but the tension is increasing in the region. So, the gold and other safe-haven assets’ price increase was sharp yesterday.

This week, the fundamental background is on the bull's side with respect to oil. In addition to the above-mentioned incident, the reduction in US reserves, tropical storm Barry likely to form in the Gulf of Mexico, and threats from Trump regarding a toughening of sanctions against Iran supported oil buyers.

The Bank of England yesterday published its financial stability report. The most interesting that was published was the likelihood of the Great Britain exit “scenario” without a deal has grown, which in turn can provoke negative consequences for the British economy. However, the pound reacted calmly to this report. So our position is unchanged - we are looking for points for its purchases.

Day two of Fed Chairman Jerome Powell's testimony to Congress, he noted that the current rates are in the neutral area, however, there is a chance that the Fed might cut the rates. At the same time, the markets are more confident with a rate cut in July. They are more likely guessing about the question “For how much it will be lowered” by 0.5% or by 0.5% at once. So far ¾ support the first variant. Recall, this is quite a bearish signal for the dollar. Analysts are revising their dollar forecasts downward. Recall, we remind you about the feasibility of selling the dollar on the foreign exchange market.

Friday promises to be a “rest stop”. And this means that participants in financial markets are likely to continue to follow the current trends.

Our trading recommendations for today are as follows. We continue to look for opportunities for selling the dollar (USDJPY, EURUSD, GBPUSD). Sell the Russian ruble. Sell the gold near the highs and buy from the lows.