MORNING OVERVIEW
Tensions in the Mid-East remain elevated, with Iran and the US threatening one another. We wouldn’t be surprised to see those threats being materialized if the two sides don’t reach an understanding. Moreover, the European narrative may be of interest to traders, with Volkswagen being dropped out the EUROSTOXX50, marking a significant blow to the car manufacturer.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| S&P 500 | 7692.55 | +0.55% | N/A |
| DXY | 100.306 | +0.08% | N/A |
| USD/CAD | 1.4012 | +0.18% | Macklem to speak today |
| Gold | 4353 | -0.70% | N/A |
| Brent Crude | 101.55 | -2.24% | US-Iran to talk at the UN? |
KEY MARKET THEMES
01 — US-Iran exchange threats over the weekend
The US and Iran exchanged threats over the weekend, with President Trump warning Iran that they would fail economically or face a leadership wipe if they refused to make a deal with the US. As expected, Iran replied by stating that they would retaliate harshly to any fresh attack. However, President Trump appeared open to meeting with Iran’s President Pezeshkian, who is expected in New York for this week’s United Nations General assembly. In turn the willingness to meet from the US’s side may have alleviated some market worries about a possible escalation of hostilities in the region once again. Nonetheless, any strike from either side could derail any hopes about a possible deal between the US and Iran, which in turn could aid oil prices, although the market appears relatively calm about the threats as long as they remain verbal.
Market implication (OIL): Bullish
02 — Volkswagen dropped from Eurostoxx 50
Volkswagen has been dropped out of the Eurozone’s most important blue-chip stock index for the first time in 15 years. The dropping of Volkswagen comes as the car maker’s share price has reached a 16 year low. According to the FT, VW stated “inclusion in an index does not alter a company’s fundamental strength” and that the group “remains an attractive investment for investors”. The removal of the company from the Eurostoxx 50 in our view, could add downwards pressures on the company’s stock price, as despite the company’s statements the removal from the index may reduce their attractiveness to investors, at least temporarily.
Market implication (#VW): BEARISH
03 — BoC Macklem to speak today
BoC Governor Tiff Macklem is set to speak during today’s American session. The BoC Governor’s could influence the Loonie, considering the market participants who will be monitoring his speech in hopes of gathering insight into the banks next steps moving forwards in terms of monetary policy. Therefore, should the Governor’s comments be interpreted as hawkish in nature i.e inflation remains high and that the bank may have to address these issues, then we may see the Loonie garnering support. Whereas on the other hand, should the Governor’s comments appear muted or dovish in nature, the Loonie may face some downwards pressures.
Market implication (CAD) : NEUTRAL
WHAT MATTERS TODAY
ECB President Lagarde’s speech
- Time (GMT+2): 18:00
- Expected: N/A
- Previous: N/A
Potential market reaction:
N/A
BoC Governor Macklem’s speech
- Time (GMT+2): 18:05
- Expected: N/A
- Previous: N/A
Potential market reaction:
N/A
WHAT MATTERS TOMORROW MORNING
RBA Governor Bullock speaks
- Time (GMT+2): 06:1
- Expected: N/A
- Previous: N/A
Potential market reaction:
N/A
ASSET FOCUS
[GOLD / COMMODITIES]
Gold appears to be moving in a sideways fashion. The precious metal’s price is currently resting on our S1 support level. For our sideways bias we would require the precious metal’s price to remain above our 4350 (S1) support level, whilst remaining below our 4250 (R1) resistance line. The RSI indicator below our chart currently registers a figure near 50, implying a neutral market sentiment. On the other hand, should gold’s price clearly break our 4350 (S1) support level, we would opt for a bearish outlook with the next possible target for the bears being our 4180 (S2) support line. Lastly, for a bullish outlook we would require a clear break above our 4520 (R1) resistance line with the next possible target for the bulls being our 4695 (R2) resistance level.
KEY LEVELS
- Resistance (R1): 4520
- Resistance (R2): 4695
- Support (S1): 4350
- Support (S2): 4180
Technical View: NEUTRAL
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| Equities | Neutral | N/A |
| USD | Bullish | N/A |
| Gold | Neutral | N/A |
| Oil | Bearish | Trump’s willingness to meet with Iran’s President at the UN |
RISKS TO THE VIEW
The US striking Iran during the UN General Assembly or vice versa
The biggest risk to our view, is the US and Iran rapidly escalating hostilities with one another during the UN General Assembly. Doing so could upend our view’s immediately.
TRADING SPHERE VIEW
Bearish for oil
Our base case:
Despite rhetoric emerging on Sunday with Iran and the US pointing their ‘knives’ at each other’s throats, President’s Trump’s willingness to meet with the Iranian President during the UN General Assembly may take precedent and thus should the two leaders meet and discuss any framework for the Mid-East, it could weigh on oil prices.
What would change our view:
The US re-escalating strikes on Iran and vice versa
TODAY’S WATCHLIST
01 ECB President Lagarde’s speech
02 BoC Governor Macklem’s speech
Disclaimer:
This information is not considered as investment advice or investment recommendation but instead a marketing communication.
