Energies trade sharply higher as President Trump appears set for a long-term blockade of Iranian oil, and mulls additional attacks on the Iranian regime.
- The main story in the market today is how the ongoing stalemate between the USA and Iran, and President Trump's current policy of a long-term blockade of Iran which he recently called "superior to bombing", are pushing up the price of energies such as crude oil and gasoline. The effects in crude oil are most notable in Brent Crude, which looks likely to close at a new long-term high today. Both oil and Gasoline ETFs such as UGA and BRNT are trading at fresh multi-year high prices. Unless there is a peace deal or a good rumour of one, or unless the rhetoric gets much more conciliatory, long of these energies looks likely to be a good trade opportuntiy, provided you are mindful of the high volatility and potential for sudden strong moves. I am long of UGA.
- Trump is being briefed today on further military strike options in Iran. If this happens, it is likely to be at the weekend while almost all markets are closed.
- In the Forex market, the strongest major currency since the Tokyo open was the Canadian Dollar, while the Japanese Yen has been the weakest. The USD/JPY currency pair is trading notably higher, well above ¥160. Many trend traders will be long of USD/JPY. I have been long for some time.
- There are two important central bank policy meetings today, the European Central Bank, and the Bank of England. Neither bank is expected to raise rates but the details of the forecasts and statements will be watched closely by the market. Any surprises could move the Euro or the British Pound. Yesterday's meetings by the Fed and the Bank of Canada had little impact and contained no real surprises.
- There will be some potentially high-impact economic data releases today:
- US Core PCE Price Index - the Fed sees this as a leading inflation indicator, so it is important.
- US Advance GDP
- US Employment Cost Index
- Canadian GDP
- In the commodities market, Wheat (WEAT) and Corn (CORN) ETFs reached new long-term high yesterday. We see a general strengthening of soft commodities. Buying softs on breakouts to new 6-month high prices and applying a trailing stop has historically been a very profitable trading strategy.
- Bitcoin seems to have found support just above $75,000.
- Gold and Silver seem to be recovering today.