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Manufacturing Data Likely To Reflect Global Crises

Published 06/01/2016, 10:58 AM
Updated 04/25/2018, 04:40 AM

Today is a day of international manufacturing data that is very likely to influence market sentiment. Russia, Spain, Italy, France, Germany, the UK, Canada, Brazil and the US – all these countries are releasing their manufacturing economic data today, so traders are expected to digest all this information coming from:

  • Eurozone’s largest economies
  • Brexit-threatened UK
  • Latin America’s largest economy
  • with none other than Russia, Canada and the US also releasing their figures.

All in all, Ridge Capital Markets expects the Eurozone’s and Brazil’s manufacturing data to be poor and indicative of the crises that are affecting those markets:

  1. Despite the ECB’s efforts, the Eurozone economy is struggling with an international economic slowdown, and with huge over-debt, over-taxation, over-ageing, over-regulation and over-unemployment levels. These problems are not going away, they haven’t been solved in any way, and they only keep getting worse – always weighing more on an anemic economy. The ECB is just playing a make-believe game to make the EUR look (more or less) respectable. So we expect Eurozone’s manufacturing data to come out ugly – which is why we restate our recommended USD/EUR long play recommendation for traders.
  2. Brazil is in a political, economic and financial chaos – and we believe that the worst is yet to come. While we like Brazil in the long-term, we believe that the market has not priced in all the problems that Latin America’s largest economy still has – and which are mounting. The new government is unelected, and definitely does not enjoy a great deal of popularity. Corruption scandals have already caused two victims in the new formed government, and the economic conditions continue to deteriorate. We believe that the BRL is overvalued at these levels, and we expect today’s manufacturing data from Brazil to be ugly – which is why we stick to our long USD/BRL recommendation for traders. We see the USD going back to buying 4.0 BRL – so there’s plenty of ground for traders to gain there.

Today we will also learn about API Crude Oil Stock’s estimates. It is important to note that yesterday WTI made it to $50 but couldn’t hold that level, falling back to $48/$49. Turmoil in Nigeria and Venezuela, and reflections of Canada’s fires have been supporting the short-term bullish oil story for more than we had anticipated.

Still, we believe that, save a dramatic and highly unexpected production cut (not freeze) decision in next OPEC’s meeting, oil is going down. That is why we continue to like a short oil position at these $48/$50 levels, and we continue to recommend traders to go long the USD against the CAD, the MXN and the RUB.

That trade should be backed by an oil correction and by the upward pressures on the USD that the Fed is creating with the possibility of a June/July rate hike.

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