Jump first ask later

Jump first ask later

Bloomberg

U.S. stocks surged higher Monday, as Trade war concerns appear to have decreased, with both China and the US suggesting that solutions to the trade impasse may be forthcoming.

Over the weekend and on Monday, there were productive backroom negotiations to ease trade tensions between the US and China and the markets naturally fed on this positivity. Indeed markets were positioning for an epic equity plunge but instead were left monumentally unwinding equity market shorts. But keep in mind big positive moves in stock markets do start with massive short covering rallies so we could be in for a significant extension.

Mnuchin said. “I’m cautiously hopeful we reach an agreement.” So equity investors do what they have done best this year, and with a great deal of success mind you, jump first ask later.

But markets have been at the mercy of the trade rumour mills, and with the sparse economic calendar this week they continue to be so but remain bizarrely singularly focused on trade. In fact,  even ignoring a good risk aversion signal when over 100 Russian diplomats were expelled from Nato countries after the fallout from the UK poisoning scandal. But perhaps correctly so as the markets have been relishing the fact that there was no swift and potential market establishing trade response from China. Obviously, one road no one wanted to go down.

Oil Markets

Oil traders are catching their breath after last week bullish run. But more significantly, we’re nudging against considerable resistance levels USD 70 Brent USD 67 WTI, areas where there’s thought to be a higher propensity for US shale producers to come back online.

While US Baker Hughes rig counts tend to lose influence amidst the waves of heightened geopolitical risk, the rig count numbers are moving ever so close to the 1000 mark, which is raising some concerns over increased production level.

But with the drop in last weeks inventory data,  traders were positioning more aggressively premised on sensitivity to geopolitical risk factors, but even despite few bearish signals, and an apparent truce in the trade wars, oil traders are respecting these levels and banking profits while taking some overextended risk off the table.

Reuters

Gold Markets

Gold prices continue to ratchet higher as the US dollar weakens despite equity markets rebounding on easing concerns about the likelihood of a trade war between China and USA. But realistically there are plentitudes of market turmoil in the making that continue to make gold the go-to place to hedge risk. Middle East tension remains on the boil, and the NATO expulsion of Russian diplomats would typically be an excellent risk-off trade and worth monitoring for a possible escalation

Reuters

Currency Markets

The dollar is getting whacked with the nasty stick, but hardly surprising as the bar for USD dollar strength remains incredibly low.

AFP

The Euro

After being stuck in the mud the past month  the break above 1.2400 provided a powerful signal and suggested the markets are looking to get back into riding a possible ECB shift in policy

The Japanese Yen

Opportunity in the making as the USDJPY should stand the most to gain for USD dollar weakness. However, the street has been unwinding over subscribed short USDJPY risk hedges which have been dominating flow. Complicating matters is a holiday-shortened week which from a liquidity perspective will throw a bit of a monkey wrench into the works. But tempting to re-engage shorts none the less.

Reuters

The Malaysian Ringgit

The stars are beginning to align again with the Ringgits fortunes especially with the market under-positioned MYR should see the Ringgit grind towards the 3.87 level

Look for equity and bond inflow to accelerate as risk on takes over the market while buoyant oil prices provide ancillary support

The Edge Market via Bloomberg

The Star Malaysia

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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