Week Ahead [Feb.3.2020]

Hey hey, Primers!


Apologies I couldn't get to upload and record this yesterday so I rushed this morning.


Next week We will do it properly! A copy of the plan is below in text version too.

How our review is done:

- Charts

- Fundamentals (news)

- Market theme


Assets to focus on:

EURUSD: bullish

GBPUSD: bullish

AUDUSD: Approaching key levels

SP500: Bearish contraction breakout

WTI: Possible bullish contraction

Important News:

First effects of Coronavirus in China can be understood by the Caixin Manufacturing PMI released in the Monday Asian session.

During the RBA meeting on Tuesday (03:30 am GMT) the markets expect a possible rate cut or indications of a rate cut coming. We do get an abnormal amount of information from Australia this week including speeches by central bank gov.

Fundamentals Explained:

The spreading of the coronavirus remained the key market theme in the previous trading week and will continue the main (A) theme for the week ahead.

We did have the first death outside of China, but it actually is a Chinese resident of the epicenter of the virus, so that should not spook the markets much. Remember that the WHO officially labelled the outbreak a Public Health Emergency of International Concern and measures to contain it were stepped up globally.

More Chinese cities and provinces have extended the holiday period until at least 10 February, fuelling fears in the market about the global economic repercussions of the virus. Compared to the SARS outbreak in 2002-03, the Chinese economy is a much bigger driver of global growth today and we estimate the outbreak could reduce Chinese GDP by up to one percentage point in H1. Hence, there is a clear risk that the expected recovery in growth and PMIs could be somewhat delayed or at least be muted.

Our strategy here will most likely be “Sell the panic but the relief or fact”.

The second market theme is Brexit (B)… which just became a reality and Britain finally left the EU after more than three years since the Brexit vote, after the Withdrawal Agreement was ratified by both the British and EU parliaments.

Focus now turns to the negotiations about a trade agreement with the EU, but time is sparse with the transition period ending by the end of the year.


Market Themes:

CORONAVIRUS: Effects - China: Holiday effect - AUD: Following China - WTI: Took a beating but ready for a reversal - Indices: Correction of a major bull market

BREXIT: Effects: - GBP: The gbp is looking bullish overall - FTSE: A strong GBP makes the FTSE weak (generally since 80% of the companies in the FTSE depend on exports, weak GBP more orders, more orders more sales + production = more revenue)

USD INDEX: The usd index has formed a down-trend (lower highs, lower lows)

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