Noticias del mercado & perspectivas

The newly-elected populist government in Italy will deliver its very first budget which will be pivotal to the Eurozone area. Italy has the second largest public government debt pile in Europe after the Greeks. The debt to equity ratio in Italy currently stands at 131.81% of its GDP, and market participants are questioning whether Italy will be able to repay its debt.

Debt to GDP ratio (%) [gallery size="large" ids=""] Why is the Italian budget a key event for the markets? The Italian Budget is crucial because it poses a potential threat to the stability of the bloc and the Euro. The Budget will dictate whether the new government will follow the European Union’s rules but most importantly, it will help to gauge whether the coalition parties are getting along well.

The Italian economy might not be able to support a massive spending bill. Investors will be most concerned about the fiscal roadmap of the country. The Five Star and the League have ambitious tax and spending plans which are the foundations of their respective party.

They have vowed to spend more, and for the coalition to work, the spending plans of both parties will have to be considered. The critical question that arises is: “Will the Budget blow the EU’s 3% deficit level?” Being one of the weakest links of the Eurozone, markets participants are wary of the possibility of a debt crisis. The EU has a ceiling level of 3% concerning a budget deficit, and investors are increasingly alarmed at the prospect that Italy might breach this limit.

The Budget will likely be focal in gauging its fiscal discipline. The budget proposals by the new Italian government has also placed Italy on the negative watch for Moody’s rating back in May. The evaluation has been postponed until further information on the budget is revealed.

The markets could see fresh turmoil if credit rating agencies flashed an adverse outlook on what the government is doing. According to the Minister of Finance, the Budget deal will be published in September, and we expect it to bring some volatility in the EUR pairs. Currently, the EURUSD is relieved from its selling pressure on the back on the US dollar weakness.

It is very probable that any noises about the Budget will cap any gains if there are rising fears that it will breach the EU Budget rules. Alongside any developments in the Italian Budget, EUR bulls might want to keep an eye on the Italian bond yields for fresh impetus!!

After being under a tremendous amount of pressure over the five past years, commodities, represented by the Bloomberg Commodity Index, finally started to show signs of relief when they rallied by some 11% (measured from close to close) over the past three months. This may not seem too much, but when you consider that since 1991 only 8% of the times the commodity index has rallied by 11% or more in any three-month period, and the fact that the size of this rally is almost twice the size of average three monthly rallies, then all of a sudden it becomes a meaningful one to watch. In previous articles, we have discussed why commodities, especially gold and oil have rallied so much, but the current question that traders face is whether this trend is going to continue or has it reached the exhaustion point?

In this article, we will look at history and try to answer the above question from purely price action point of view. To do this, we’ve looked for any historical returns that matched the current returns (plus or minus 10% variation to allow for random market fluctuations) and got the models to investigate what has happened to each commodity 1, 3 and six months after such events. The Commodity Index In total, there have been 15 other cases where the Bloomberg Commodity Index has rallied by around 11% over a three-month period.

Out of these, seven happened after the GFC (during the commodity boom), and the rest belong to periods before 2008 through to 1991. The table below shows what’s happened to the commodities each time they rallied by 11% in a three month period. The Commodity Index performance after an 11% rally in three months As you can see, an 11% three-month return doesn’t have much of explanatory power for the next 1-3 months as the number of positive and negative case over the next 1-3 months are almost equal.

While the next 1-3 months are not clear, trend direction in the next six months is in a much better position. Based on the table below, there is a 77% chance that commodities end up being higher over the next six months. Gold For the month ending 29/4/2016, gold was up by 21% compared to the closing price at the end of November 2015.

Since 1928, only 5.6% of the times gold has rallied by 21% or more in any five month period. During this period, gold’s average five-month positive return was around 12.6%. Therefore, the rally from the end of November 2015 to end of April 2016 is significant in both the size and the frequency of gold rallies.

The table below shows what’s happened to gold each time it has rallied by almost 19% over a five month period. Gold’s performance after a 21% rally in five months Like the commodities index, while the table above doesn’t have much to say about the direction of gold in the next 1-3 months, it suggests however, that over the longer term (August onwards) it may resume its rally. Oil As at the end of April 2016, Oil (represented by Brent) was up 39% from the January close.

Out of 331 three monthly returns from 1998 up to now, there have only been 12 cases where oil has rallied by 19% or more in any three months. With the average of positive three-month ret urns being around 14%, the recent rally is rare both in size and frequency. The table below shows what has happened to oil each time it has rallied by almost 39% over a three month period.

Oil’s performance after a 39% rally in three months According to this table, there is a 57% chance that oil keeps on trending higher from May to the end of July. However, this is not a great probability as it’s only slightly better than tossing a coin to predict the future direction of oil. Therefore, I won’t hold my breath on it.

Another concerning point in the short term is the sequence of monthly returns. If Brent manages to finish higher for May, then it would be the fourth consecutive month that oil has posted positive back- to-back returns. Historically, there is only a 40% chance that oil continues trending higher after it’s had four consecutive positive monthly returns.

Therefore, in the short term, I am not confident that oil can continue going higher (unless we get some new news about further supply disruptions which is a different story all together). US Dollar Since none of the above tables were able to give me a rather confident guidance for the direction of commodities over the next 1-3 months, I turned my attention to the USD index for some clues and this time I found something useful. In early May 2013, the USD index briefly dipped below the 93 support level.

However, it wasn’t long before the index rapidly rallied back up and went above its bearish trend line. According to the chart below, the last three times USD bounced back from the 93 support line, it easily rallied to 98 and once even touched the 100 area. Monthly USD index Chart The current rally also ended a three-month losing streak which began in February.

Based on historical data, once the greenback ends a three consecutive losing streak, it usually climbs by an average of 2% in the first month and keeps on appreciating by an average of 3% over the next 2-3 months. The table below suggests there is a 69% chance that the dollar keeps going up in the next 60 days. USD dollar performance after breaking a three month losing streak So no firm sign of exhaustion but… So far in this article, it is reasonable to conclude that while the current rallies in the commodities themselves have not yet reached a specific exhaustion point, due to a 69% chance of stronger dollar in the near term, one should adopt a rather bearish view or at least a conservative view on commodities.

Therefore, it may be the time to take some profits or at least not add any more long positions. Based on technicals, should the USD rally, I can see gold dropping to 1206 and then to the 1150 area. In the case of Brent, my first major support is around $43 with a possible extension to $41.

Weekly AUDUSD Chart Please note that trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. You should only trade if you can afford to carry these risks.

Our offer is not designed to alter or modify any individual’s risk preference or encourage individuals to trade in a manner inconsistent with their own trading strategies. Ramin Rouzabadi (CFA, CMT) | Trading Analyst Ramin is a broadly skilled investment analyst with over 13 years of domestic and international market experience in equities and derivatives. With his financial analysis (CFA) and market technician (CMT) background, Ramin is adept at identifying market opportunities and is experienced in developing statistically sound investment strategies.

After eight long years of crisis whereby Greece endured stringent budget austerity programs, the country’s bailout will finally come to an end. Greece will therefore have to finance itself by borrowing on international bond markets. Before the bailout Greece was battling massive debt, loss of investment and huge unemployment.

Nearly €300bn were provided in “emergency loans” in three consecutive bailout packages. A long period of austerity helped Greece to avoid Grexit and started to grow again. Even though the exit is a big positive “milestone”, Greece is going to remain under enhanced surveillance given the unpopular amount of the bailout.

Government Gross Debt as a % of GDP Source: International Monetary Fund, World Economic Outlook There are hopes that Greece might be a “success story” just like Portugal, Spain, Ireland, and Cyprus but the debt problems in Europe are far from solved. A huge debt in Greece and Italy will remain the lurking financial threat to Europe. Net ECB Lending (Greece, Ireland, Italy, Portugal and Spain) Source: Bloomberg Terminal Aside from debt problems, the European Union is also facing other key challenges: Anti-austerity Government in Italy The debt problem in Italy has now turned into a political one.

The rise in anti-austerity government is a political crisis that calls into question the survival and stability of the European Union and its shared currency. It shows that the Eurozone problems had not be laid to rest. Brexit Brexit had elevated fears that other countries might follow the same step which is a crucial threat to the bloc.

The recent elections within Europe had revealed a rise in European populist parties. This created a situation that feeds fears that all is not well in the Euro. Trade Tensions The EU’s divided union prevents the EU to act in unison to fight the US on trade-related matters.

A wobbly European market due to the current trade risks coupled with geopolitical risks are constant threats for the common currency as European members with a fragile economy will suffer. Investors are indecisive on whether to return which might explain Europe eagerness to paint Greece as a “comeback story”. Greece’s bailout coming to an end is good but it still has a long way to go.

Debt problems in Europe remain a big threat and the political situation in Italy is an even bigger issue than Brexit.

Creating New Monthly Highs Yesterday gold reached a three-month high of $1,239.68 which, as we head into the final quarter of 2018, is once again stirring up price speculation and talk of a change in directional bias. While the fundamental aspects appear to be related to hiccups in global stock markets, we'll focus on the technicals for clues as to how these moves might pan out in the medium to long-term. Before we examine charts on the daily timeframes, I want to highlight something interesting on the hourly which is unfolding at the time of writing.

Looking at the chart below, notice that price action is finding short-term support around the current weekly pivot around the 1225.00 level. You can also see this predominantly sideways pattern which we will discuss further, prompting many analysts to suggest this price region as a sticking point for the metal. XAUUSD Hourly - Candlestick Chart On to the daily chart below, one thing that I am looking for here is some validation for a shift towards a more bullish sentiment, and even from a quick glance, evidence for this scenario is thin on the ground and limited at best.

First up, price action is still trading well below the 200-day moving average (gold line) which suggests the longer-term trend remains bearish. Next, we can see the formation of a bullish flag which initially sparked my interest yesterday, but now looking more like a false breakout with the price rejecting those levels above 1230.00. Of course, the potential is still there for this pattern to develop further.

It would be wise to remain cautious though. XAUUSD Daily - Candlestick Chart The last two aspects of this chart worth noting are that the current RSI (Relative Strength Index) is showing signs of heating up again, pushing up towards those overbought levels seen around the high. We also have a missed weekly pivot at the 1208.00 level which I think may present the next best support level in the short-term.

Both of these elements are arguably bearish for gold. I've included some Ichimoku analysis below, as I believe it showcases the bullish flag pattern a bit clearer than the previous chart. The other reason is to recognise that although price action has managed to punch above the cloud suggesting little resistance, the lagging span (purple line) paints a more subtle story, one of quiet indecision as it sits within the cloud.

This indicator spells a mixed bias from a directional perspective and leads me to believe we could be in for additional sideways moves longer-term. XAUUSD Daily - Ichimoku Chart Depending on which chart you analyse, the general sideways theme is persistent in all of them. In similar fashion to how the Ichimoku chart best illustrated the bullish flag pattern, the point and figure chart below captures this overall sideways movement in my opinion.

XAUUSD - Point & Figure Chart Delving further, we find another potential clue for the recent bullish momentum. Notice the recent sell-off, there was a considerable increase in supply following a rejection of the key resistance area (triple top) at 1350.00 so what we may be witnessing here is the price attempting to consolidate. So, do I believe stock market jitters are causing buyers to step back into gold as a potential flock to safety?

In short, no. While there is undoubtedly a case for this type of activity, I think it's too early to tell. I've also mentioned in previous articles that gold hasn't been behaving as a traditional safe-haven asset of late.

The technical picture is clear; the gold market is uncertain and somewhat confused as shown by the sideways tendencies. At this stage, only a convincing break above 1350.00 would give credit to a more substantial change in overall sentiment and another bullish run. For the time being at least, no doubt the meandering will continue, but overall I remain bearish on the precious metal in the medium to long-term.

By Adam Taylor This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk.

Sources: TradingView.com

Friday 7 th July 2017 saw the official start of the two-day G20 summit in Hamburg, Germany, were delegates from 19 countries come together to discuss matters ranging from free trade to Global warming. We have compiled this quick guide to what you can expect from the markets after this year’s summit. What is G20?

The G20 started in 1999 as a meeting of Finance Ministers and Central Bank Governors in the aftermath of the Asian financial crisis. In 2008, the first G20 Leaders’ Summit was held, the main issue discussed was in responding to the global financial crisis. The decisive and coordinated actions boosted consumer and business confidence and supported the first stages of economic recovery.

Who is a member of the G20? The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States and the European Union. The group represents around two thirds of the world's population, and 80% of the world's trade and economic activity.

The G20 is two days of formal meetings, preceded by informal meet-ups. Since last year’s meeting in China, over a quarter of the countries are under new leadership; Donald Trump (USA), Theresa May (UK), Michel Temer (Brazil), Paolo Gentiloni (Italy), Moon Jae-in (South Korea), and Emmanuel Macron (France). What should you expect from the markets?

According to research in 2014 by ECB (European Central Bank) concluded "The big picture arising from our analysis is that effects of G20 summits are small, short-lived, non-systematic and non-robust." Although, they did emphasize they weren’t able to measure the long term impact associated with policy makers becoming familiar with each other and long term trade deals negotiated once the summits had ended. I think it’s vital to add that this study was completed before the era of President Trump. No leader in recent years has so avidly professed his disdain for the current frame work of world trade, believing that the rest of the world is benefiting from America’s weakly negotiated trade deals.

His protectionist views, meaning protecting domestic industry from global competition, would benefit the US economy in the long term if enacted. How will “America First” resonate with the twenty other leaders? It’s impossible to predict, but any statement or plan advancing his wish-listed views would see a global market reaction.

By: Samuel Hertz GO Markets

Since September last year, the British Pound has enjoyed a relatively easy time against the Australian Dollar, often described as a solid bull run. However, many fundamental drivers have turned sour for the Sterling crosses, and with GBPAUD in particular, we may be in for a significant price reversal. What's Driving the Pound Aussie Pairing?

The obvious elephant in the room would be Brexit. For a while, it seemed there might have been light at the end of the tunnel for the UK and the EU, hence the bull run. However just recently, UK Trade Secretary Liam Fox has predicted that the odds of a ‘no deal’ are now as high as 60-40 due to difficulties, and subsequently, the general sense of doom and gloom weighing on the UK economy has reared its ugly head once more.

Australian Dollar Not Resistant To A Few Headaches On the flip side, conditions aren't necessarily much better south of the equator. As a commodity-centric currency, the Australian Dollar is struggling while trade-war-like tensions brew between the US and China. If we add jitters in Turkey creating a sell-off in higher risk currencies, as well as the RBA’s more cautious tone on inflation, the overall picture for AUD appears just as bleak as the Pound Sterling.

Since we've established both currencies have their potholes on the road ahead, let's push the fundamentals aside and discover a potential trading opportunity from a technical perspective which appears to be gaining traction. GBPAUD - Daily Starting with the daily chart above, notice the price action is trading considerably below the 200 day moving average line in gold. It indicates an overall bearish trend so long as the prices continue to close below 1.7657.

A Potential 1000 Pip Move? Well not quite. Based on the latest technical analysis, the formation of a head and shoulders reversal pattern is developing, and should it follow through, we would be looking at a downside target of approximately 965 pips.

How was this estimation reached? Let me explain. Below the chart highlights the developing Head and Shoulders reversal pattern.

Next we draw the neckline in blue. We then measure the distance between the neckline and the top of the head formation and record this figure. Once the price closes below the neckline closest to the right shoulder, we minus the length of this distance to the levels below creating a price target.

In this case, we see a target price of 1.6265 or (1.7230 - 965 = 1.6265). What I find most interesting with this potential price target (1.6265) is the fact that the 1.62 regions have been known to be a substantial area of support back in September last year when the latest bull run first began to emerge. It's almost as if the pair is attempting to return full circle should this move come to fruition.

With both domestic economies currently under fire, it will be tough to know which of these currencies will win the battle and come out on top. If Brexit negotiations are as much of a mess as we're lead to believe in the media, it's only logical that the Pound will haemorrhage across the board and we could see some severe moves such as this. However, given the level of risk out there in the markets at this stage, we could just as quickly see the Australian Dollar lose its footing and tumble down.

By Adam Taylor CFTe This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk.

Sources: Tradingview, Bloomberg