‘Beware the Ides of March’ may not be apropos for the March failure of the repeal & replace of Obamacare with the American Health Care Act.The US economy was initially rattled when House Speaker Paul Ryan pulled the bill before it went to a vote. This was a pyrrhic victory for Democrats and conservative Republicans. It was also an indictment against President Donald Trump, and his inability to push through on campaign promises. Initially, markets reacted negatively to the failure of this potentially groundbreaking legislation. However, the global economy has rallied and nerves have calmed. More importantly, we are seeing US economic data releases that defy gravity. For example, the Citi Global Economic Surprise Index reflects better-than-expected data, with figures at a 7-year high. In much the same fashion, the Bloomberg Global Economic Surprise Index is also at a 5-year high
What Aspects of the US Economy Are Performing Well?
US consumer sentiment in March reported its best reading since 2000, but it was small business optimism that really skyrocketed – hitting its best reading in over 4 decades. These soft data readings do not dovetail with real economic data which remains lukewarm. Consider that US retail sales increased by just 0.1% in February 2017 – hardly a reason to celebrate. The markets could go either way: if the buoyancy in consumer and business sentiment continues, an upswing will take place. Then, Wall Street will continue its unprecedented rally – which has slowed significantly of late – and stock markets will enjoy further upside momentum. One should never discount the effect of soft data on the economy, for it has the capacity to drive speculative sentiment which can build the case for strong fundamental growth. Q4 GDP growth increased at an annualized rate of 2.1%, bolstered largely by better-than-expected consumption expenditure. Corporate investment in the US remains a concern.
Trading opportunity #1 – Has gold gone cold?
Gold is currently trading at $1,248.92 per ounce, up 0.13% or $1.62. The precious metal rallies when traders adopt a risk-off approach to equities markets. Over the past 30 days, gold is down 0.13%, or $1.60 per ounce, with flat trading in recent sessions. The short-term movements needn’t worry traders looking for direction since the overall performance of gold during Q1 2017 has been particularly bullish. In fact, gold has gained ground once again with a 7.1% appreciation versus the USD since January 1, 2017. As far as direction is concerned, binary options traders can certainly project bullishly with call options. One of the most important markets for gold is Asia. Consumption expenditure in that region is a big driver of the gold price. Another big driver of gold demand is Comex gold futures. These volumes have increased from 10% to 30% on the London bourse in the OTC market.
Short term, we can expect choppiness in gold trading, but long-term demand will continue. This will drive up the price of gold as geopolitical uncertainty kicks in.
Trading opportunity #2 – EUR/USD pair on the decline
Binary options traders know all too well about the volatility of the USD in recent weeks. However, the EUR has also been heading south. As a result, we can see sharp declines in the EUR/USD pair. The current trading rate of the EUR/USD is 1.0663, down 0.15% or $0.0016. Simply put, less USD is needed to purchase the equivalent of €1. And the reason why we are seeing euro weakness is inflation data across the Eurozone remains weak. This means that European Central Bank President Mario Draghi will continue with his accommodative monetary policies. This naturally weakens the EUR. The key data that rocked confidence in European economic indicators was the fall in inflation from 2% in February to 1.5% in March (year on year comparisons). There was an expectation of a 1.8% increase, but that fell by the wayside. Inflation targets are important when it comes to central bank policy. The ECB has been targeting 2% inflation as one of its key objectives. One way to increase inflation is by accommodative monetary policy.
Trading opportunity #3 – Wal-Mart stock showing promise
Over the past 5 trading days, there has been a significant uptick in Walmart’s stock price. As the trend indicates, Walmart is a bullish prospect, and the stock is now trading at $72.08 per share, up 0.68% or $0.49. For binary options traders, the trend is your friend. Walmart Stores is a better buy than Target Corporation in many ways. Walmart’s price has held steady since May 2016, while Target has plunged from around $83 per share to its current level around $53 per share. As the biggest retail employer in the US, Walmart is rapidly closing the gap with other major e-commerce platforms like Amazon. Walmart is also preferable to other US retailers like Costco, despite the fierce competition between these retail giants. For starters, Walmart’s dividends have increased dramatically over the past 25 years, being listed on the Dividend Aristocrats S&P 500 companies. Costco has delivered dividend increases over 10+ years. The reason Walmart is going to keep rising is its heavy investment in e-commerce. Amazon will soon find a viable competitor with Walmart. For binary options traders, the short-term trend is bullish and call option should be placed accordingly.
Trading opportunity #4 – Trading the Nasdaq
The Nasdaq composite index is currently trading at 5,911.74, down 0.04% or 2.6 points. Towards the end of March, the USD reversed 3 weeks of losses and racked up its strongest 5-day gains in 2 months. Recall that the greenback retreated after the Fed refused to specify additional rate hikes for 2017 beyond what was anticipated. The failure of the AHCA initially slapped the dollar’s strength, but this proved short-lived. One of the biggest drivers of the Nasdaq this coming week will be the meeting between the Chinese president and the US president. Trump anticipates a difficult meeting with China, given that he believes they are pursuing unfair trade practices. If the meeting does not go well, the world’s #1 economy and #2 economy will lock horns and this will be bad for international trade. The tech-heavy Nasdaq typically reacts sharply to these types of tensions. As a binary options trader, it may be wise to go short on the Nasdaq when the meetings get underway.
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