Should We Be Optimistic?
During the abbreviated first week of trading in 2019, markets have been volatile, but ended the week on a positive note. We think this is a short term phenomena.
The USD index is the chart that we are focused on now: The USD is holding in a range 97.50 to 93.50.
Given the mixed signals from recent economic indicators:
Unemployment report much stronger than expected from the U.S.
Sharp fall in the DEC ISM report in the U.S. as well as weak PMI reports globally.
Federal Reserve Chairman Powell gave the market what it wanted to hear in terms of being flexible on rate hikes going forward. Also that it could be flexible regarding the reduction of its balance sheet.
Saudi reduction of output, is helping oil prices stabilize.
Weak Chinese growth, confirmed by PMI.
We have stated earlier there were a few conditions that needed to be met in the new year to keep the global stock markets from heading lower.
- The Fed will need to be less hawkish
- Trade talks between China and the U.S. will need to find some sort of middle ground where both sides can claim victory.
Both of these issues seem to be in place, although the markets will need to see positive confirmation on trade before being convinced.
Short term we are expecting:
Crude to test $60
Equity markets to trade higher for another few sessions
The USD to test lower levels
Gold to consolidate at current levels
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