EUR/SEK still looks south – Danske Bank
By Pablo Piovano
In view of Senior Analyst at Danske Bank Piet Christiansen, SEK is expected to gather further traction in the next months.
“EUR/SEK temporarily moved below 10.30 on Friday driven by a general sell-off in EUR and decent retails sales figures from Sweden. There is no doubt the hawkish tweak of the Riksbank rhetoric has changed the appetite toward the SEK, and we still see potential for additional SEK appreciation in the coming months targeting 10.20 in 3M ahead of a possible rate hike in December (our call)”.
“However, we expect the rate hike from the Riksbank in December to a be one-and-wait, which leaves the repo rate at -0.25% for longer than the Riksbank plans, for the most part of 2019 at least. This should limit the downside potential in EUR/SEK over the medium-term horizon”.
“We target 10.20 by the end of 2019, and given the balance of risk for the SEK (not least given the political situation in Sweden), we recommend taking advantage of the recent SEK appreciation to build up 2019 hedges via Knock-in Forwards, which secures a worst-case rate while maintaining some profit potential in the event of a decline in EUR/SEK”.
GBPUSD Could Drop on Tory Party Conference, PMI firms
By Justin McQueen
With the annual Tory party conference now underway, the question will be whether history will repeat itself this week. UK PM May will give a keynote speech at the conference on Wednesday, 2-weeks before the EU summit which will be dominated by Brexit negotiations. As a reminder, at the two previous party conference speeches made by Theresa May the Pound has fallen an average of 1% in the following week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall.
EURUSD Sell-Off Continues on Italian Budget Concerns, USD Strength
By Nick Cawley
A combination of ongoing Italian budget concerns and a US dollar invigorated by a last-minute NAFTA deal may push EURUSD back to the low seen on August 15 at 1.1300. with support levels looking shaky. In addition, last Friday’s Euro-Zone inflation print disappointed on the downside with the core reading falling to 0.9% from a prior month’s 1.0%, still substantially below the ECB’s mandate of around 2%.
Italian budget concerns continue to rumble on, putting pressure on the country’s debt pile. 10-year yields are looking to make new multi-year highs (yields go up when prices go down) with the EU Commission looking likely to reject the budget in November, leaving Italy at the mercy of an unforgiving bond market. 10-year Italian bond yields are currently just over 3.20%, around 270 basis points more than comparable German debt (0.48%) and 168 basis points more than 10-year Spanish bonds (1.52%).
The US dollar continues its revival post-FOMC and is nearing a three-week high after news broke that the US, Canada and Mexico had reached a new three-way trade agreement called USMCA which will replace the old NAFTA agreement.
Commodities Week Ahead: Brent Poised To Close In On $85; Gold Under New Pressure
Brent is likely to forge highs nearer $85 a barrel this week, pulling US crude along in a broad rally, as fears over upcoming sanctions on Iran ensure no imminent end to the bull run in oil.
Investing.com’s daily technical outlook has a “Strong Buy” on both Brent and WTI, with no immediate sell targets. Brent has so far blown past the median forecast of $74 a barrel for the third quarter from a July Thomson Reuters poll of oil analysts. WTI has also surpassed the median of $69 given for US crude in that poll.
With just a month left to the start of new US sanctions on Iranian oil exports that could remove up to 1.5 million barrels per day from the global market, analysts say there is little to halt the upward momentum in both Brent and WTI, save for a deal between Tehran and Washington.
Natural Gas will be another energy market on traders’ radar this week as extraordinary demand continues to defy seasonal trends in keeping the power generation fuel at above $3 highs.
Analysts said prospects for natural gas would be bearish from just its record high production, which the US Energy Information Administration expects to reach 81.34 billion cubic feet per day this year from 73.57 bcfd in 2017.
But the picture turns bullish if one was to consider pre-winter heating stockpiles, which were at one of their lowest in years due to unusually high volumes of gas burnt by utilities this summer to feed power demand for air conditioning. EIA data showed working gas in storage totals 2,768 billion cubic feet versus the five-year historical range of 3,389 bcf typical for this time of year.
Gold could seek a sharply lower support beneath $1,200 if the dollar starts rallying again on Fed expectations of another rate hike in December, which would be the fourth for the year.
The “combination (of a) more hawkish Fed, inflation in check, rising yields and the greenback should be bearish for the gold prices,” said Arkadiusz Sieron, precious metals analyst at Sunshine Profits.
Investing.com’s daily technical outlook has a “Strong Sell” for the yellow metal, with Fibonacci patterns setting the first major support at $1,180.28, second at $1,176.32 and third at $1,169.90.
Stocks To Watch In The Coming Week: Facebook, Tesla
The crisis of confidence in the world’s largest social media platform, Facebook took another ugly turn on Friday when the company disclosed that an unknown number of hackers obtained login access to as many as 50 million accounts. That access let the intruders act like users in the hacked profiles, or on any applications where they signed in using Facebook.
The extent of the damage to Facebook’s reputation from this latest data breach is hard to quantify at this point. It’s unclear what the hackers did with the access and who they were or whom they were trying to target. In this uncertain environment, the company’s shares will remain vulnerable and losses could extend.
Tesla the company and the stock is in the middle of a firestorm after the US Securities and Exchange Commission (SEC) decided to sue CEO and Chairman Elon Musk for securities fraud based on his tweet last month that told investors he had secured funding to take the company private. In its suit, the SEC sought unspecified monetary penalties and asked a judge to bar Musk from serving as an officer or director of a public company, the agency said in a lawsuit filed in New York last week.
On Saturday, news broke that Musk had reached a settlement with the SEC, which allowed him to remain as CEO of the embattled auto manufacturer, though he’ll be required to resign from his position as chairman for three years. The ongoing drama surrounding Musk personally has caused investors to loose faith in his leadership. Indeed, Tesla stock plunged 14% on the SEC move.
TSLA shares are likely to remain volatile in the coming week.
Risk Disclaimer: The information contained in this market review should not be construed in any way, as containing investment advice and/or a suggestion and/or solicitation for any trading activity and financial transaction. There is no guarantee and/or prediction of future performance. EuropeFX, its affiliates, agents, directors or employees do not guarantee the accuracy and validity of any information or data made available and assume no liability as to any loss arising from any investment based on the same. Trading Forex/CFD’s carries a high level of risk and can result in the loss of your whole investment. Forex/CFD’s are leveraged products and therefore Forex/CFD’s trading may not be appropriate for all investors. It is recommended that you do not invest more money than you can afford to lose to avoid significant financial problems in the case of losses. Please make sure you define the maximum risk acceptable for yourself.