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Market Focus and Key Events in 2017

   

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After an eventful and volatile first half of 2017 we look forward to what, if any, opportunities the second half of this year bring us.

 

Well it’s been a tumultuous first half of the year with markets driven by a political agenda both in Europe and the US. In Europe, the supposed populist up-risings have waned with elections in Netherlands and France seeing a return to normality. As it stands such results almost certainly guarantee a re-election for Angela Merkel in the September elections.

That not surprisingly will have an impact upon DAX, EURUSD, and EURGBP as part of the ongoing Brexit Negotiations.

However, before those elections we have the normally quieter summer months of July and August to contend with. In European terms, we expect this to continue. Any likely change to this being driven by a possible roll-over in US markets (watch out for NFP Fridays), contagion from the Italian banking situation (monitor CDS spreads), or another terrorist/geo-political event.

The German elections are the main event for traders running into the latter half of the year and it is essential to monitor the political landscape and the polls in Germany. Traders will also be keeping an eye on any possible interest rate rises in the US, UK and Canada. Every central bank meeting can result in a short term high volatility market.

As we return to a perceived kind of normal after a barmy 12 months what if any outlandish events could we expect in the second half of the year?

Possibly Theresa May, despite all her domestic turmoil, choosing to walk away from the Brexit Negotiation with the EU and playing hardball. Once again, we think this is a low chance, but high impact event. Where it to happen, we would see both a fall in Euro & GBP but then once the dust settles we think a longer-term GBP strength play comes on to the table. The EURO shorn of its 2nd largest net contributor will struggle until those gaps are plugged, and will other EU nations just willingly hand over extra cash to the Brussels Bureaucrats to cover the shortfall? Especially if global markets fall way during that period?

The other “low probability” scenario nobody has factored into their models is the US entering into a recession at some point later this year as a clear sign of Trump’s inability to deliver change and sustainable growth, ultimately leading to new presidential elections. US equities would suffer the most as they are in overpriced and overbought territory, followed by a strong correction downwards of the USD, especially against the EUR and a spike up in prices for US government bonds. Such a scenario would cascade through the global markets, creating almost unprecedented volatility.

 

EURUSD: The first half of 2017 was broadly positive for EURUSD, based on post Macron Euro strength and Trump induced USD weakness. If the long-term resistance level of 1.1450 is broken and maintained above on a weekly and monthly level then we’d be looking at a move towards 1.1650 as the next target.

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GBPUSD: The first half of the year saw GBPUSD move from lows of the 1.20 zone up to 1.30.  So far there has been considerable resistance above 1.30. If the UK economy stays strong and Brexit negotiations are positive (for the UK) then expect a move towards the 1.34 zone. Should the May Government falter, or the economy decline then expect moves back towards 1.20

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DAX: The June Key Month Reversal on the DAX chart shows us a probably top for the summer months. Until the likely re-election of Angela Merkel there may be some sideways movement until the elections in Sept/Oct.

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OIL: Despite recent volatility, at present we see OIL trading in a range between $40-$50 for the remainder of the year, so long as there no war between Qatar and the rest of the Gulf states!

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Safe trading!

Paul Wallace & Malte Kaub

About the Guest Writers

Malte Kaub - Malte Kaub is a finance professional with more than 10 years of deep experience in trading. His expert knowledge and network has compressed the learning curve for traders of all experience levels.

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Malte Kaub - Malte Kaub is a finance professional with more than 10 years of deep experience in trading. His expert knowledge and network has compressed the learning curve for traders of all experience levels.

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Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

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