May 18, 2017 - Market Update

Short recap

Trump – Special Counsel headed by former FBI director Robert Mueller to investigate Trump-Russia connections

Risk off overall, messy market reaction in Asia but creation of the Counsel may temper down the nerves

USD - no clear direction for the market today yet

USDJPY – no clear safe heaven buying reaction overnight

Market still to face uncertainty until more clarity on the scope/areas of investigation and schedule is known

The investigation can take months/years

Republicans likely to prepare their own healthcare, tax and infrastructure bills, not waiting on Trump to clean up the mess

It will also serve as a way to differentiate from him

As mentioned yesterday, Trump is a small piece of US long term economic growth

Investors may be distracted and overlooking that US economy is strong enough to cope with Trump mess (productivity and capital wise)

Impeachment still way way far from here and need 2/3 of Senate vote

Possible impeachment – only three presidents faced it, namely Andrew Johnson (1868), Richard Nixon (resigned after Watergate scandal in 1974) and Bill Clinton

Fed June rate hike at 65%

EU rethinking the capital market union due to Brexit

And get the large chunk of trading in euro-denominated instruments currently traded in London

Equities

Elliot Management met with BHP Billiton yesterday

DOJ to file a lawsuit against Fiat Chrysler if no agreement over emissions

VIX jumped 45% yesterday

Investors taking profits and positioning with more caution also due to weaker US data

To watch materials, techs and financials, as they may suffer

Bonds

2-yr Trys yield at 1.26%

10-yr Trys yield at 2.24%

10-yr Bund yield at 0.37%

EURUSD

Lots of ECB speakers today, likely to send a united message after sharp EUR jump

Market staying nervous

Selling interest may be seen within 1.1180/1.1200 area

No real resistance until 1.1300 (high), eventually at 1.1250

Support at 1.1073 (76.4% Fibo) and 1.1028 (high)

USDJPY 

Cross staying heavy towards 111.50, likely stops above

Interest seems to be at 110.50 (61.8% Fibo) with stops below

US politics and yields in charge

Gold - approaching possible supply zone based on daily chart, watching

…looking to buy USD? USDCHF might be the candidate

Upcoming

ECB’s Weidmann (0700 GMT), Mersch (0750 & 1230 GMT), Lautenschlaeger (1245 GMT), Nowotny (1250 GMT), Draghi (1700 GMT) speaking

Fed’s Mester (1715 GMT) speaking

Fri

ECB’s Constancio speaking

Fed’s Bullard speaking

Iran elections - impact on security and oil production

May 24 – former FBI director James Comey to testify before Senate (1330 GMT)

May 25 – OPEC/Non-OPEC meeting

June 8 – ECB meeting

June 8 – UK elections

June 11/18 – French Legislative (Parliamentary) elections (a big question mark for Macron to gain majority)

June 13/14 – FOMC meeting – market pricing rate hike at 65%

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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