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Trade Tensions Ease Slightly

by Archer Financial Services | May 14, 2019

By Alan Bush | Senior Financial Economist at ADMIS   
  

STOCK INDEX FUTURES

U.S. stock index futures advanced when President Donald Trump said he believed discussions with China “will be very successful,” with the outcome anticipated in three or four weeks.

Responding to President Trump, the Chinese government’s top diplomat said China and the U.S. both have the “ability and wisdom” to reach an agreement that is good for both.

President Trump said he would meet Chinese President Xi Jinping next month at the June 28-29 Group of 20 summit.

The April National Federation of Independent Business small business optimism index was 103.5, which compares to expectations of 102.4.

U.S. import prices rose less than expected in April, increasing 0.2% from the previous month. The increase was much smaller than the 0.6% gain that was predicted by economists.

Because of the volatility and political uncertainties of the U.S.-China trade situation, now is a good time to avoid stock index futures and instead focus on the long side of flight to quality vehicles, such as the Swiss franc, the Japanese yen, the interest rate futures market and gold.

CURRENCY FUTURES

After four days of declines the U.S. dollar index is higher, as trade tensions subside.

The euro currency is lower on news that German economic sentiment collapsed in May, according to the ZEW research institute.  ZEW's measure of economic expectations fell to minus 2.1 in May from 3.1 points in April when economists forecast a rise to 5.0.

The Canadian dollar is lower on news that Canadian home prices were unchanged in April, failing to increase for eighth consecutive months.

I would trade the flight to quality currencies, the Swiss franc and the Japanese yen, from the long side since these currencies are likely to continue to be the main beneficiaries of the ongoing trade issues between the U.S. and China.
 

INTEREST RATE MARKET FUTURES

New York Federal Reserve Bank President John Williams said tariffs will likely stoke inflation in the coming year.

Williams said U.S. monetary policy is “in the right place” and that he doesn't see the need to have an upward or downward bias regarding the future path of interest rate policies.

Kansas City Federal Reserve Bank President Esther George will deliver a speech about the Federal Reserve and the U.S. economy at 11:45 central time this morning.

Financial futures markets are predicting there is a 72% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its December 11 policy meeting, which compares to 70% yesterday.

 

SUPPORT AND RESISTANCE

June 19 S&P 500

Support    2795.00      Resistance    2834.00

June 19 U.S. Dollar Index

Support    97.010        Resistance    97.370

June 19 Euro Currency

Support    1.12270      Resistance    1.12840

June 19 Japanese Yen

Support    .91260        Resistance    .91960

June 19 Canadian Dollar

Support    .74140        Resistance    .74440

June 19 Australian Dollar

Support    .6935          Resistance    .6977

June 19 Thirty Year Treasury Bonds

Support    149^0         Resistance     149^24

June 19 Gold

Support    1294.0        Resistance     1307.0

July 19 Copper

Support    2.7100        Resistance     2.7450

June 19 Crude Oil

Support    60.55          Resistance     62.34


For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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