Volumetric analysis on December 19
The reduction of the S&P500 index by 14% from the maximum values of this year is a significant reason not to tighten the US monetary policy. But Powell has already set up the market that it will still happen today. About 70% of market participants laid expectations that today the rate will be increased by 0, 25%. At this moment we have four scenarios. The first and the most unlikely one that interest rate will be increased, and Fed's rhetoric there will be a signal that in 2019 we will have another increase. The dollar will react to this by moderate strengthening, because market would not believe to such words, but Trump will certainly mark this fact. The second scenario - the rate will be raised, and in rhetoric they will indicate that in 2019 there should not be any increases. The dollar will respond to this growth due to the rate increase, but there will not be any special movements. Yet the market has already laid this scenario. Third, the rate will not increase, and there will be no more work to rhetoric, as the US dollar will immediately weaken. And the fourth, the most likely scenario. The rate will be raised, and in rhetoric they will indicate that further decisions will be made on the basis of incoming macroeconomic data. The movement of the US dollar at this point will be difficult to predict. But this message will force us to closely monitor macroeconomic data in 2019.
Our actions. We assume that before the FOMC decisions are announced there will be no special movements. And the FOMC itself will follow our most likely scenario. Then we accept the price range of 1.1360-1.1320 as support, and in case of a corrective decline, we assume purchases with the target of 1.1440. We do not wait for price appearances below 1.1320, but, given the fundamental background, we do not exclude such scenario as well.
And yet the scenario that we feared was realized. OPEC and OPEC + agreed, but did not execute the agreement, in any case, there is reason to believe so. And that means that the need for the cartel itself disappears, and oil, respectively, falls. Two ideas. One speculative one is when selling upwards to sell from the range of 49.90-48.30 with the goal of yesterday's low or even further. The second is positional - to recall that oil is a commodity with its own break-even point, which according to some data stands at $ 39. So, the lower the oil falls, the more profitable it is to buy it. The appearance of prices at around 39 is possible, but for a short time. Therefore, without a leverage with the prospect of further growth, you can trade lows.
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