This week has been an interesting one for dollar, oil, gold and other currencies. Unfortunately, due to my full time work ( completely unrelated to markets) I was not able to follow the market and I missed two important events. FED announcement and EIA report on crude oil inventories. two reports that I could make a decent return on. I regret so much for that. it hurts to miss a good opportunity.
For the past few weeks Wikileaks revealed Podesta emails related to Clinton. Since my last writing FBI launched the second investigation related to Clinton scandal. From that moment, the market started to become more careful with presidential campaign. Chance of Trump win has increase from a week ago. I sometimes look at the polls but mostly follow Nate Silver’s ( you should Google him) website ( http://projects.fivethirtyeight.com/2016-election-forecast/ ) . It shows rising probability of Trump win despite it is still hovering around 32%. 5 days left till the election, I am betting on Clinton win so far unless something serious comes up again till the election day. I will go long on SP 500 for Clinton win. Otherwise, will reverse to short if Trump wins.
FED announced no rate hike on Nov 2 which forced greenback to fall. Dollar lost its value against major currencies. EIA further announced one of the largest crude oil inventories built up (14.4mln b) in more than a decade.
Gold is also affected rising above 1300$ after FED announcement also Trump’s chance of winning election. If Trump is elected that means new trade deals which can make gold prices sour higher. Now, a lot of issues are depended on the upcoming election. The direction of dollar is currently uncertain after the election. Clinton win I think will give a positive signal to the market as well as to the dollar. Speculators will jump on a wagon to make quick bucks. However, uncertainty relies on Trump win. Tightened trade deals, uncertainty of his future moves on economic, political and social issues will make less encouraging for foreign investors and for global US companies to bring back cash to US. This might cause a fall in dollar. On the other hand, falling dollar would make ECB, BOJ to loose their policies over again which can push dollar up. Trump win is also more likely make FED to keep rates intact due to future uncertainty.
Despite current fall of dollar after FED announcement can be reversed by Clinton win which i am betting on it even if I don’t want it.
Haruhiko Kuroda, governor of BOJ kept its policy unchanged on 1 Nov, however, it seems he is having hard time to meet its inflation target of 2%. 10 Year government bonds was kept at zero yield. Yen position did not play in my favor as dollar got stronger however I am holding to it.
More interestingly Oil fell quite low in the past week. It seems unlikely OPEC deal and bearish participants are leading the trend. Two major OPEC producers will not likely agree to cuts. Furthermore, companies who have filed for bankruptcy in the US are not actually closing down their operations but keep producing, structuring their businesses by slashing costs. It seems Saudi Arabia strategy did not work after all. Rather they themselves got hit harder by low oil prices. Till the next OPEC meeting, major oil price movers will be crude oil inventories report and likely US presidential election. I am still long on oil, right now my unrealized P&L is almost zero. more downfall will result in losses which i am not into it.
I am still betting on Clinton win, therefore, rising dollar and SP 500. Oil is still uncertain so, I will stop taking positions for a while on oil (however, hold on to my current one), till I see a clear picture and where it will lead to. OPEC is still worrying me. I will take positions on gold which I think will see a support at 1300. I might change my positions on SP500, dollar abruptly if election results favor Trump. However, gold looks like a heaven for investors over again for now.