Trends and Trades for 2018

Trends and trades for 2018 are starting to prefigure as investors return to their stations and open new positions in the new year.

Trends and Trades in Asian Stocks

On the 2nd day of the year, Asian stocks hit a 10-year high after a Chinese manufacturing report showed an increase in the industrial production of the second-largest economy in the world. The uptrend was supported by news that North Korea had symbolically offered an olive branch. At the same time, Kim Jong Un said he was ‘open to dialogue’ with Seoul leaders.

In reaction, MSCI’s index of Asia-Pacific stocks outside Japan added about 0.9%, rising nearly 1/3 in value last year alone.

Japanese Nikkei saw little to no action, while E-Mini futures for the S&P 500 climbed around 0.1%. Spread betters estimated a more impetuous opening in Europe.

Shanghai blue chips went up by 1.2% after the Chinese Caixin hit 4-month peaks in December to 51.5% despite negative expectations of a downfall.

Trends and Trades in Currencies

Advancing into Europe, the EUR added lots of pips against its USD peer on Tuesday. EURUSD hit a record daily open of 1.20105 as the US dollar index ditched to the 3-month trough below 92.00.

Analysts suggest that ‘normalisation’ will continue to be the main item on the ECB’s agenda in 2018. European policymakers will likely release a new wave of ‘normalisation trades’ mid-2018 to boost the single currency through debt flows. Despite the positive thought behind it, this might weigh down a lot on the SEK.

On the other side of the pond, the USD experiences the pressure of the somewhat tepid market sentiment around the new Fed Chair Jerome Powell, who is seen as less experienced in market communication and crisis handling.

Danske Bank analysts suggest that the cyclical outlook will continue to support FX carry trades, despite the appeal that long-volatility positions may have for hedging fans.

GBPUSD’s climb was stalled by milder-than-expected UK Markit manufacturing PMI as the buck’s weakness seems to be keeping the pair afloat. With a daily open at 1.35101, the cable remains in the positive territory. Although the pressure around the Sterling may persist in the following days, taking a closer look at the daily live chart showing a figure of 1.35557, any weakness in the GBP is less likely to change anything in the pair’s trading.

USDJPY opened at 112.774 and seems to go lower, as of writing hovering above 112.120 (live daily). The bearish trend seems to persist as technical indicators continue to head south.

The slippage in USDCAD has come to a halt on Tuesday, as the rally in oil prices stalled. Following a daily open at 1.25363, the pair’s steady trending is supported by a corrective slip in US oil prices. US oil prices have seen a minor correction, with WTI turning negative ($60.23/barrel) and thus supporting the resource-moved Loonie.

The EURGBP trend will be first and foremost driven by the Brexit, which according to Rabobank is likely to be a huge disruptive force and a cornucopia of volatility for the Pound in 2018.

With a daily open at 0.88897, EURGBP hovers above 0.88932 on the daily live chart. Will it move up or down? It depends on the Brexit. “The tone of these talks and the extent to which May is able to rally her cabinet behind her will be crucial in setting the tone for GBP in 2018”, Jane Foley, Senior FX Strategist at Rabobank highlights.