May 10 2017 3:57 pm

Another one bites the dust

We would like to wish warm congratulations to the country of South Korea. It's very reassuring to see an elected official who has built his career as a defender of human rights.

This is in stark contrast to a certain nation who recently elected an official who built his career with the words "you're fired!"

Somewhere in the middle, it seems that France may have just elected a bitcoin enthusiast. The following photo shows Emmanuel Macron holding a hardware bitcoin wallet. Wouldn't it be nice if a populist leader could pave the way for the entire EU to start using Cryptocurrencies?

Macron

To me it just makes sense. The man is a socialist and a former banker and seen by many as a liberal at heart. Let's just imagine that we live in a world where the tipping point is already happening in Japan and India, what's to stop a young ambitious new leader from bringing it to the West?

Perhaps it's time for the UK to start asking Theresa May what her stance on digital currencies is? You'll never know unless you ask. wink

-Mati

Today's Highlights

  • Comey got canned
  • Dollar Weakness
  • Draghi Day!

Please note: All data, figures & graphs are valid as of May 10th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Another one bites the dust. Yesterday President Trump fired the head of the FBI leaving many Americans to ask the question... can he do that?

Yup, apparently he can.

The way it happened once again gives me confidence in the man's ability to play politics if not in his ethics. Just last week Hilary Clinton placed most of the blame for losing the election squarely on James Comey's shoulders. So when Trump fires the man responsible for investigating his ties to Russia, he can say to his opponents... "What?... You don't like him anyway."

The reaction from the financial markets was rather muted. First, the news broke only after the US markets had closed for the day. Second, at this point, there's little that Trump can do that would actually surprise people.

There has been commentary so far suggesting that this mess may take Trump's attention away from the stuff that matters, like health care and tax reform.

However, if this does turn into a Nixon style meltdown that causes Trump to either resign or get thrown from office the implications could be much larger. Looking at the stock markets this morning, it doesn't seem that anybody really expects that to happen except clients in eToro....

In this chart, we can see the Net Open Positions in eToro on all of the stock indices. The dotted line means that clients are even, some long and some short but overall offset each other.

Here we can easily see how clients started shorting the indices in preparation for the Brexit vote, then for a short time in early November they were long again but ever since Trump's election clients have been holding heavy short positions on the stock indices.

Net open positions eToro

The US Dollar is looking a bit down today, but that could be for a different reason. Yesterday Dallas Fed President Robert Kaplan cast doubt on the Fed's plan to hike rates twice more this year expressing concern that inflation is starting to stagnate.

The Dollar Is Green

Enough talk, here are a few charts that show the ever so subtle Dollar pullback. First one is the Dollar Index...

USDollar

and of course the USDJPY...

USDJPY

the Australia Dollar...

AUDUSD

So as we can see, not very much of a pullback. More like an entry point for those thinking the current Dollar strength trend will continue.

One more chart though... Here's the Pound Sterling, which is on a tear this morning...

GBPUSD

...and looking for a breach of 1.3000. A very significant level indeed.

GBPUSD1D

Oops, that was two more charts. Gotcha wink

What else?

Mario Draghi will be giving his first speech since the French elections. Investors want to hear hints that the EU will be winding down their massive stimulus package and following the USA's path toward raising rates to a normal level. With the French election risk out of the way, this could be a good time to do just that.

Crude Oil inventories will be watched. There's very little in the way of support on the chart. As the supply glut continues, it is becoming increasingly clear that there is little OPEC can do to stop the fall. Oil has a way of creating a domino effect on financial markets and its stability is essential to the entire global economy.

Interest rate decision coming out from New Zealand this evening. No change is expected. If there is a change, it will certainly rock the Kiwi. The announcement is coming out early enough to watch without missing any sleep. wink

This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.

Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.

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