The Top Five Instruments That Are Getting Traders Interested

The extension of the OPEC production cuts has brought numerous benefits to the oil cartel and other producers, as evidenced by the rapid rise in WTI prices over the last few months. However, despite efforts to bring inventories near their five-year average to rebalance the stockpile glut, statements from the cartel indicate that further action is still needed. Although the International Energy Agency’s recent warning of a potential shortfall in global supplies sent oil prices surging, other factors could swiftly drive them back down.

For one, US producers have been quickly filling the void left behind by their OPEC peers, with daily production climbing well past the 10-million-barrel mark with additional capacity still available. Second, OPEC producers, witnessing the rebound in prices, may opt to not extend the deal. Should output be allowed to rise, it could precipitate another downturn in prices. With OECD inventories back up in January following a five-month decline, any signs that OPEC will not extend the deal again, or indications that US shale production will continue surging, might cause the most recent rally to reverse. However, simmering tensions in the Middle East could keep prices elevated should rhetoric turn into military action.

USDCAD: Will NAFTA Renegotiation Hurt an Already Fragile Canada?

Canada is already in a fragile state as high levels of household debt and a slipping real estate market weigh on the outlook. Add to this the threat of a trade war heating up with the neighboring United States and the USDCAD pair might have further room to run. The deterioration in the Canadian economy is evident from slowing growth and inflation, although the most recent recovery in commodity prices could help stabilise the economy and buoy growth near-term. Furthermore, the announcement that Canadian auto parts exports will not be harmed by NAFTA renegotiations is a possible cause for optimism.

Even though the US dollar has recently found itself under pressure amid the slew of emerging risk factors, it has stayed relatively strong against the Canadian dollar, helped in part by uncertainty surrounding trade negotiations and policy tailwinds. Furthermore, considering the Federal Reserve’s hawkish attitude, the US dollar may outperform its Canadian peer over the near-term. While the Bank of Canada is forecast to raise rates in the coming quarters, sluggish inflation and concerns about recent housing data could stall these efforts, weighing on the Canadian dollar. Nonetheless, with a US government shutdown possible, the Loonie may still have a chance to reverse recent losses against the dollar, sending USDCAD back towards February lows.

BTCUSD: A Tool for Financial Liberation or Pure Speculation?

The meteoric rise of bitcoin during 2017 attracted the attention of not only the media, but the retail investing community as well. The promise of helping to build a more democratic vision for the future of finance has been well received but achieving its lofty aims of helping to serve the unbanked and underbanked still remains a distant goal. After correcting more than 60% from lifetime highs, the speculative rush that ensued last year may have halted. However, the bottom of the latest tumble may still not have been reached with pullbacks in excess of 80% witnessed in past years.

At its core, bitcoin still presents an interesting case for investment – namely because of its widespread recognition and the view among some investors that it represents the digital equivalent of gold. In effect, this means that bitcoin may move opposite to other more established financial markets and be perceived as a hedge against another steep market downturn. Still, the rampant speculation in bitcoin might mean that another shakeout of smaller traders is imminent. Until it achieves greater adoption and acceptance among merchants, its feasibility will remain questionable. Nonetheless, considering the large percentage swings that occur on a daily basis, bitcoin presents an extraordinary opportunity for short-term traders chasing volatility in their strategies. With more high-profile regulatory announcements likely, bitcoin’s rollercoaster momentum is an area to monitor for trading ideas over the near-term.

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STOXX 50: Are Italy's Days in the EU Numbered?

The rise of Euro-sceptic populist parties in Italy is threatening the European outlook with the latest election presenting a fresh set of threats towards the region’s political and monetary unions. Italy has long been an underperformer across the Euro Area, suffering from high unemployment, low growth, and stagnant inflation. The latest election results suggest a serious transformation might lie ahead. With leading politicians calling for an exit, there are growing concerns across Europe that such a decision could embolden other political movements lobbying for withdrawal from the European Union.

Although Italian shares represent a small proportion of the Euro Stoxx 50 index (accounting for 4 out of the 50 components) worsening sentiment could spread throughout the index if the next governing coalition starts taking steps towards an EU exit. With the ECB already predicting the end of asset purchases and possible rate hikes as early as 2019, the major risks right now for the Euro Stoxx 50 are political in nature. The prospect of tighter monetary policy and a trade war with the United States will only add to the downside pressures facing stocks. However, with no end in sight for the political uncertainty enveloping Italy, further downside for the index could be in store if “Italeave” anxiety does not subside soon.

Netflix: Is its Ascent Sustainable?

After returning over 100% across the last 12 months and sporting a price-to-earnings ratio of over 200, there are signs that the run higher in Netflix shares may be reaching an exhaustion point. There was widespread optimism that Apple might acquire Netflix following tax reform which would help the technology company recoup overseas cash, but Apple’s recent denial has hurt the valuation. However, apart from the M&A rumours, Netflix has been adding debt to its balance sheet very rapidly, hurting the outlook if it proves unable to sustain its breakneck pace of growth.

Add to the equation expectations that the company will allocate approximately $8 billion to creating its own content over 2018 and the pace of spending could force the company to raise more money via bond sales or by diluting shareholder equity. This strategy of accumulating market share at any cost could conceivably dent the upside momentum in shares, leading to a near-term correction or pullback.  Even though short interest from investors is near a 10-year low, a notably bullish indicator, a turning of tides is possible if shares of other tech giants continue to slip. If subscription results manage to match expectations, the meteoric rise in Netflix shares may continue, but surging content costs could still weigh heavy on the outlook.