With dollar as strong as it only was a year ago, other assets are feeling very unstable.
Oil has to be watched closely this week.
Oil output is a very beg topic for the oil-producing countries right now. With so many interests on the plate it is only natural, that some of them are going to collide, protecting their own interests. But someone’s private interests are pushed aside when the deal is coming to the economic stability of the whole world. And that doesn’t seem to bother Russia and Saudi Arabia as they are trying to get as many votes as they can in order to boost oil output to the market. But founding OPEC countries seem to have another opinion on the matter. And it is good.
Friday is going to mark the meeting of the OPEC countries and there is a high chance that oil will lay low until the meeting. After all traders are going to see the risks connected with trading as asset that can undergo a very rapid change in the nearest future. Iran, Iraq and Venezuela saying that they will block Russian and Saudi Arabian decision to boost oil’s output and that is the only thing that can save oil market from a total crash.
It is very dangerous to mess with the oil output. Even the smallest movement is instantly mirrored in the prices. And if the output grows the prices will go down hard, because the world doesn’t really need as much black gold as Russia and Saudi Arabia seem to think. A lot of countries are set to ban gasoline engine by some point in time and that will sufficiently cut the demand. After that happens oil will start being outdated and will be very narrowly used. What do we need an output boost now for? The only answer possible is that someone wants to mess with the market prices. But why? Unfortunately we will have to look at the oil price closely for the nearest five days and wat foe the OPEC decision on Friday. Then we can talk about it.
Japanese markers may go on break. Manufacturing is down.
Just a few hours ago it was reported that 6.1 magnitude earthquake has hit Japanese Osaka. There people were killed, including a child. Besides, the second largest city in all of Japan is now deprived of manufacturing and has a water mines bursting up problems. Oh, my. Yen has it very hard lately, doesn’t it?
Of course, such an occasion is always a tragedy for the countries. Lives are lost and a whole lot of infrastructure has to be built up again. But we have to look at it from the economic point of view. Yen has been very weak for the last couple of months. With all of the attention being ties to dollar and euro, we are forgetting about the regional problems, surrounding Japan. Meeting of the officials of Central Bank of Japan didn’t really improve the situation. Yes, Japanese currency today is in the green zone but if dollar remains as steady-on-high as it is today, then Japan is going to have a problem.
Strong dollar has always been a problem for yen. Just like oil and gold it is tied to the American currency. And with all of the local problems there is a chance that it will take it quite some time to recover. We just can’t imagine the scale of difficulty – rebuilt manufacturing in the second biggest city in the country that relies on electronics manufacturing hard. Until everything is reconstructed and even after that it will take time for Japanese to get back in the game. Shocking, that even nature can influence equity market of the country, isn’t it? One earthquake can undermine a while economy.
General trading tip for the week.
Trading this week may be even trickier than the last. Last week there was a lot of things happening, but one thing for sure – of Trump-Un meeting goes well the greenback will skyrocket. And that is exactly what happened. This week on the contrary, everything is much more complicated because there is a lot less answers for the traders.
We have already talked about the risks that one has to consider, trading oil and JPY including currency couples. Now let’s talk about euro.
Euro is standing mostly on stability in Germany. And it can be undermined in the nearest time as Angela Merkel can be doing non-reparable damage to her career with new immigration policy. Europe has been suffering from Eastern immigrants for several years now and that is precisely the problem that has to be fixed by the European officials in general and Angela Merkel in particular. And it has to be done very quickly – until EU summit that is going to take place on June 28-29. Is Merkel can’t present a right solution her political career can simply be over right there and then. And that can undermine the stability of euro.
Heavily relying on Germany and weighed down by the southern countries, euro is now showing all the weak spots that it has.
With strong dollar metals are falling down heavy with platinum sinking to the levels beyond $1000 per ounce. As we can see strong dollar is very good for the USA, but all of the other assets are going crazy because of it.
