Trading the Global Financial Markets in the Last Quarter of 2016
■ Forex Markets: EURUSD is expected to keep ranging, GBP may face more selling pressure, and the AUD uptrend could continue
■ Equity Markets: The focus is on the US elections, with odds favoring sellers
■ Energy Markets: A production cut of 1 million BPD is expected in late November; if Iran and Saudi Arabia confirm, crude could reach $60 per barrel
Increased Volatility Ahead of the US Elections in November
In recent weeks, global markets have been quite volatile. UK Prime Minister Theresa May set March 2017 as the start date to leave the EU, pushing the British pound lower against both the euro and the US dollar. As we’ve noted before, EURUSD is likely to keep trading in a range until the US elections. Both the ECB and Fed see the EURUSD rate as a stabilizing factor amid current financial instability.
Equities remain near record highs, but the real test will come after the US election on November 8, 2016. Oil prices have risen following a historic agreement between OPEC and non-OPEC countries to cut production by nearly 1 million BPD in late November.
Foreign Exchange Markets
The British pound dropped further after Theresa May’s announcement to begin Brexit talks by March 2017, aiming for a UK exit by 2019. The pound hit a post-Brexit low against the euro. UK Chancellor Philip Hammond warned of Brexit-related turbulence and noted that the Forex market expects the pound to weaken further.
In September, Jean-Claude Juncker announced plans to double the duration and financial strength of the European Fund for Strategic Investments. He said, “We will ensure the European Investment Fund provides at least €500 billion by 2020 and aim to reach €630 billion by 2022.”
The US Dollar remains quite strong. In September, Janet Yellen said the case for raising short-term US interest rates has grown stronger due to solid job growth. The US Dollar Index (USDX) continues to consolidate ahead of the November 2016 US elections but maintains bullish momentum, trading within the channel (A1:A2).
Chart: US Dollar index (USDX)
Crude Oil – The End of the Production War?
In late September, OPEC members reached an unofficial agreement to limit oil production to 32.5 million barrels per day, cutting nearly 1 million BPD. This is expected to be confirmed at OPEC’s meeting in Vienna on November 30, 2016.
This is the first time in over a decade that OPEC and non-OPEC countries have agreed together. Many oil analysts believe this deal could push crude prices close to $60 per barrel.
The true impact of this agreement depends on confirmation from Iran and Saudi Arabia. If confirmed in late November, crude could reach $60 per barrel.
🔗 More: » Information About Crude Oil Trading
Is There a Bubble Forming in Global Equity Markets?
Globally, sovereign and corporate bonds with negative yields now exceed $13.4 trillion. This is a result of quantitative easing programs over recent years in Europe and the US. Central banks have injected liquidity, pushing stock and bond prices higher and yields lower. Here are some key points:
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In Europe, more than 120 bonds offer negative yields
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Global bond markets are hitting continuous record highs
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US stock markets (US30, US100, and US500) are also at record highs
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The US is experiencing its longest period of profit growth, now over 7.5 years
George Protonotarios, Financial Analyst
🔗 Link: » George at LinkedIn
■ Trading the Global Financial Markets in the Second Semester of 2016
TradingCenter.org, October 2nd, 2016
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