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Slight Change of Context

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Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o   Less likely to happen

  • The bond spreads of Spain and Italy have had a notable increase over the German ones

However, the midterm elections in the USA are more worrying, which are taking place in November.

–          Which means Trump will put more pressure on trade with other countries.

o   This lead to uncertainty and lower growth in global terms

o   However, also they are useful to clarify ideas

For now, we can rely on the rebound that happened on Friday, due to two things that need to happen this week.

  1. The Italian Government should be formed and avoid other elections which can be interpreted as a danger to the Euro.
  2. In Spain, the budget program should go forward, and there should not be any surprise from the government.

Anyway, we cannot rely on this too much as the protectionism will still grow. In general terms, the investment strategy should not change.

–          We should be still exposed to markets

o   We still are within an expansive economic cycle

–          We elevate the perspective looking to 2019

o   Due to the current change of context to a worst one, returns will be slightly lower but that will not change the overall direction of the markets

 

Technical Outlook

US Dollar Index


After taking profits, the US Dollar Index is hanging between the resistance it just touched and the support it previously broke. So, for now, we´ll wait until it breaks one of them and position in the right direction.

 

EURUSD


EURUSD remains in the green, and there is not any support or resistance that signals a change of trend. Hence, for now, we remain short.

 

GBPUSD


GBPUSD is hanging on a key after breaking the first resistance. Now, it is facing the second monthly resistance. In case it does not break it we´ll remain short. However, if it closes above the bearish trendline that is now facing, we might consider changing the strategy to a more bullish position.

 

USDJPY


It remains in the same situation as we left it. It is going sideways between resistances and supports. Recently it has touched the support confirming it and possibly now it can go up to the resistance. However, for now, the movements are too small to care about them, so we remain on the side, looking at how it behaves and waiting for a clear breakout.

 

CRUDE OIL


US Oil just broke a strong monthly support which creates a strong entry to join the recently formed bearish trend. We captured the initial movement and now can be a good opportunity to join again after this last breakout of a resistance.

 

DAX


As analysed in the macroeconomic outlook, the fundamentals remain solid and the technicals too. If it does not close below the support, it is now facing we´ll remain as bullish as we are now. However, if it breaks the support and retests it, we might change to short, but for now, everything is in place for a low but positive uptrend.

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