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Varchev Finance: Trading day in one post - 15.08.2018

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Asian stock market: Asian shares slipped in Wednesday trade, although recent worries over Turkey's currency crisis moderated as the lira stabilized after its recent drop. In Japan, the Nikkei 225 shed 0.44 percent after the last session's near 500-point bounce. Australian stocks firmed through the morning, with the S&P/ASX 200 reversing early declines to drift higher by 0.05 percent. Hong Kong's Hang Seng Index traded close to 1.2 percent lower. That was a common story across most sectors, with Tencent extending losses, last trading lower by 3.3 percent.

 

FX market: EUR / USD extended the losses on Tuesday, recording 4 consecutive days of losses. The pair fell below the key technical level of 1.1400 and is currently changing hands at 1.1342, the lowest price since July 2017. The pair broke under consolidation support that lasted 2.5 months and bears again control the market. The downward movement at EUR / USD correlates with the rise in the dollar index, which touched a new 13-month high. Like the currency pair, DXY has been consolidating since the end of May and broke up at the end of last week. EUR / USD has met the expectations of traders, for the time being observing their technical formation. On Tuesday, an engulfing, trend-confirming bar on a daily chart is formed, which suggests that bulls' headaches have not yet ended. These levels are not good for short positions as there is no place to put and protect the Stop Loss, but by the end of the week I expect each rise to give a good opportunity to add to the short exposure to the trend.

 

Commodities market: OPEC oil production rose in July. Block production averages 32.32 million barrels a day for July, up with 41,000 barrels, OPEC reported in its monthly report. The organization agreed in June to increase production by 1 million barrels per day to prevent a sharp rise in oil prices. This happened after President Trump called on the organization to act to prevent further growth. At the same time, OPEC lowered its global oil growth estimate by 20,000 barrels per day, to 1.64 million barrels a day this year. This is due to weaker than expected oil demand from Latin America and the Middle East in the second quarter. The organization also said that trade tensions between the US and China are unlikely to have a major impact on world oil demand growth, unless the cracks extend beyond these countries. OPEC expects demand for crude oil to be 32.9 million barrels a day, which is about 600,000 barrels less than last year.

 

European stock market: European sectors are expected to follow the example of their colleagues from Asia and start the session mixed. Uncertainty around Turkey has led investors to withdraw their equity from stocks and to pour them into safe haven assets. As far as the economic calendar is concerned, there are several important events that traders need to look out for in the new week. Today UK will announce the inflation figures.

 

U.S. stock market: The monthly fund manager survey by BofAML shows the largest positions held by institutional money managers. Some speculators track the survey as a contrarian signal. The idea is that the most crowded positions are most exposed to the risk of a long squeeze: this is because most funds have predetermined losses on each position. This means that a surprising turn in the trend can cause a wave of sell orders on the market. That's the theory. In practice the indicator is not foolproof, and cannot be used for timing a counter-trend position. Despite this we still find the indicator useful in showing the overall positioning in the market, as well as highlighting the positions that are exposed to the largest risk of loss if the trend turns unexpectedly. The most crowded position for the seventh consecutive month remains long FAANG (Facebook, Amazon, Apple, Netflix and Google) and long BAT (Baidu, Alibaba, Tencent). The fact that this has been the most crowded position for the seventh consecutive month demonstrates the indicator's key weakness: it cannot be used for timing.

 

Economic calendar for the European and U.S. trading sessions:
11:30 UK - CPI
15:30 USA - Retail Sales
16:15 USA - Industrial Production
17:00 USA - Business Inventories
17:30 USA - Crude Oil Inventories


 Trader Aleksandar Kumanov

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