Financial market research and analysis

Investors lacked appetite following Donald Trump’s agitated inauguration due to protests. The US dollar lost ground against all of its G10 counterparts.

The GBPUSD (+0.55%) traded higher on the back of a broadly softer US dollar and on hopes that the UK’s Supreme Court would ask Theresa May to consult policymakers before triggering the Article 50. Many expect lawmakers to refuse a sharp divorce with the European Union and invite Theresa May to adopt a 'softer Brexit' approach. Therefore, this could take some pressure off the pound’s shoulders.

The FTSE 100 stocks plunged to 7131p at the open. Mining stocks (+0.36%) outperformed, as financials (-0.91%) and technology stocks (-0.94%) led losses.

The global risk-off, combined with a stronger pound and Brexit uncertainties could encourage a deeper downside correction in the FTSE 100 stocks. The critical mid-term support stands at 7088p (major 38.2% retracement on Dec 12^th to Jan 15^th rally). If broken it would suggest a mid-term bearish reversal.

OPEC accomplished up to 80% of targeted cuts, oil little changed.

The world’s leading oil producers, mostly including the OPEC countries met in Vienna over the weekend to put in a place a system to monitor whether each country sticks to its output cut promises. According to Bloomberg news, the cartel has already reduced its total production by 80% of the 1.8 million barrels targeted by day. Venezuela and Saudi Arabia, which provide nearly 60% of OPEC supplies to the US, gave little credit to Donald Trump’s plans to end the US’ oil dependency.

Markets gave little attention to news. The soft US dollar helped WTI (-0.13%) holding ground above $53.00, while Brent crude (-0.11%) traded above $55.00. The supply side action is necessary to cap the downside in oil markets, yet it is important to note that the upside potential is contingent on demand, and the stalling global demand keeps investors unconvinced for fresh longs, hence the barrel of WTI is subject to a solid resistance into the $55.00 hurdle.

Turkish lira at risk, as Erdogan comes a step closer to the supreme power

The Turkish lira (-0.28%) has been among the rare losers against the US dollar. After weeks of chaos, the Turkish Parliament finally approved a constitutional referendum,  which could take place as soon as early April. The referendum could give the actual President Recep Tayyip Erdogan the supreme power at the heart of the country. ‘This will take Turkey out of the democratic column and turn into a dictatorship, pure and simple’ reported Bloomberg Intelligence. We could expect to see acceleration in capital outflows due to political uncertainties. The Central Bank of Turkey (CBT) will meet tomorrow and is expected to raise the overnight lending rate by 75 basis points. There is a risk of smaller action or inaction. We prefer staying clear from Turkish lira and lira-denominated assets.

Gold is still testing $1219 offers.

Gold (+0.59%) extended gains to $1219 (major 38.2% retracement on Jul-Dec decline) in Asia, yet failed to break this resistance for the third time in a week. Hesitation regarding Trump’s economic boost plans are keeping investors on the fence.

Surpassing $1219 could encourage a further rise to $1235 and $1268 (100 and 200-day moving averages respectively). Support is building above the weekly support level of $1195.