Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

May's Plan B Eyed As Markets Eye Flat Open

Published 21/01/2019, 07:27
Updated 05/03/2019, 12:15
  • Markets and Brexit
  • Gold and USD
  • Oil
  • Trade war and China GDP

Markets flat ahead of plan B speech

It’s expected to be a relatively slow start to the week, with the extended weekend in the US weighing on volumes as the country observes the Martin Luther King Jr day bank holiday.

European indices are mostly eyeing a pretty flat open, with markets taking little direction from Asia overnight and potentially anticipating a relatively uneventful day overall. Of course, with the Brexit process having suddenly accelerated – a little over two months until exit day – traders are going to be constantly on high alert to breaking news and speculation.

Theresa May will present her plan B to parliament this afternoon following the humiliating defeat of her deal last week. The pound has been holding up quite well so far, despite all the theatre in parliament, but this has less to do with what May is achieving and more to do with the efforts of other MPs to take no deal off the table. This is the currently the greatest risk for the currency.

Gold flat at the start of the week

Gold is trading rather flat at the start of the week, in line with the movements we’ve seen in the dollar. A pull back on Friday came on the back of another jump in the greenback and as equity markets continued to push higher, with investor sentiment continuing to improve on encouraging progress in US and China trade talks.

Gold Daily Chart

Gold Daily Chart

Gold has been very resilient over the last week and a half, constantly threatening to break above $1,300, despite the fact that the dollar had been making steady gains and the risk environment is improving – not ideal for a traditional safe haven asset. Despite this, I remain bullish on the yellow metal but a break above this key resistance zone may just take a little longer, with $1,260 offering potential support if $1,280 gives way.

Oil edging higher even as Chinese data confirms slowest growth since 1990

Brent and WTI are continuing to creep higher at the start of the week, with the improved risk environment being an important tailwind for prices. The rally does appear to be losing some momentum as prices approach important resistance zones – $65 in Brent and $55 in WTI – which is understandable given that we’ve already seen a roughly 25% bounce since Christmas.

Oil (WTI and Brent) Daily Chart

Oil (WTI and Brent) Daily Chart

Data released overnight confirmed that the Chinese economy grew at its slowest pace in 28 years, a further worrying sign that an already decelerating economy is feeling the pain of a trade war with the US. This is unlikely to ease at the start of the year, although talks do appear to be progressing. China has reportedly presented a plan to increase imports over a six year period to reduce the trade imbalance, something that if enforced could be an important win for the Trump administration ahead of his re-election bid next year.

Disclaimer: This article is for general information purposes only. It is not investment advice, an inducement to trade, 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. Ensure you fully understand all of the risks involved and seek independent advice if necessary. Losses can exceed investment.​

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.