5 March 2018 Weekly Analysis
GCMAsia Weekly Report: March 5 – 9
Market Review (Forex): February 26 – March 2
Greenback extended its losses last Friday following the proposal of US President Donald Trump to impose tariffs on steel and aluminum imports which could raise higher chances to a global trade war. The dollar index recorded a loss of 0.38% during late Friday trading while closing at around 89.98 for the week.
According to Donald Trump, the United States will impose a 25% tariff on steel imports while 10% tariff on aluminum imports. The highly controversial move raised fears that the US main trading partners which includes China would take countermeasures, triggering a trade war between countries.
In retaliation, the EU emphasize that the economic bloc is contemplating to endorse duties upon $3.5 billion of US imports if they proceed with Trump’s tariff proposal. The announcement has sparked higher risk aversion in the financial market with investors flocking towards safe-haven currencies and assets such as Japanese Yen and gold.
The decision came two days after a hawkish rhetoric delivered by Fed Chair Jerome Powell in his first testimonial which calls for a gradual pace of interest rate hike over the backdrop of persistent economic growth and performance.
USD/JPY
Pair of USD/JPY extended losses by 0.44% to 105.75. Japanese Yen received further bullish support after Bank of Japan Governor Haruhiko Kuroda postulate that the central bank is considering to exit from its ultra-loose monetary policy by 2019 as there is high chances for their inflation to attain the bank’s target.
EUR/USD
EUR/USD appreciates further, cashing in 0.43% to $1.2317 during late Friday trading session.
GBP/USD
Pound sterling rose 0.20% to $1.3800 against the greenback on Friday. However, further upside on the currency remains limited amid Brexit-related woes after Prime Minster Theresa May suggested to reduce UK’s access to the single market which would reduce the chances for a so called soft Brexit outcome.
Market Review (Commodities): February 26 – March 2
GOLD
Gold price remains well in bid following widespread risk aversion in the market after US President Donald Trump suggested to impose tariffs on steel and aluminum import. Price of the precious metal rose $5.42 or 0.41% to $1,322.49 a troy ounce.
US President Donald Trump announced last Thursday to impose import tariff as much as 25% and 10% to steel and aluminum respectively, sparking higher chances of retaliation from US major trade members such as China.
In spite of higher demand for safe-haven, gold prices still set to post its second consecutive weekly losses as the yellow metal failed to appreciate further due to hawkish rhetoric delivered by the Fed Chair Jerome Powell with regards to future interest rate hike.
Crude Oil
Crude oil price mends some losses during late Friday trading while upside remained limited due to fears over rising US crude production which has achieved an all-time high. Price of the black commodity appreciates by $0.12 or 0.20% to $61.52 per barrel.
According to US oilfield services provider Baker Hughes, the number of active oil drilling rigs in the US rose by 1 to 800, its highest level since 2nd April 2015. The data has added further concern over the US following Wednesday’s report which shows an uptick in daily crude production which has achieved record high of 10.3 million barrels per day. Its current level has positioned the US as the world’s second largest oil producer after Russia, fueling fears that it may take some time for rebalancing to occur in the market.
Adding further into overall bearish sentiment was a rather pessimistic report from EIA’s inventories reading for last week. US crude inventories rose 3.019 million barrels, exceeding expected rise of only 2.4 million barrels while gasoline inventories rose sharply by 2.483 million barrels versus a decline of 190,000 barrels seen. A higher stock count for gasoline may spell trouble for the commodity global price as it may portray a lower activity in refinery which could lead to a supply glut in the market.
Weekly Outlook: March 5 – 9
For the week ahead, investors will be paying attention to regional central bank meeting in Australia, Eurozone, Canada and Japan to attain further clues with regards to their views upon current economic condition and future monetary policy. Otherwise, market participants will also anticipate the release of Nonfarm Payrolls report on Friday – one of the import barometer which provides a clearer picture with regards to US employment market health and condition.
As for oil traders, they will be eyeing on US inventories level reported by API and EIA to gauge the strength of crude demand for world’s largest oil consumer.
Highlighted economy data and events for the week: March 5 – 9
| Monday, March 5 |
Data AUD – Building Approvals (MoM) (Jan) CNY – Caixin Services PMI (Feb) EUR – Markit Composite PMI (Feb) EUR – Services PMI (Feb) GBP – Services PMI (Feb) EUR – Retail Sales (MoM) (Jan) USD – Markit Composite PMI (Feb) USD – Services PMI (Feb) USD – ISM Non-Manufacturing Employment (Feb) USD – ISM Non-Manufacturing PMI (Feb)
Events N/A
|
| Tuesday, March 6 |
Data GBP – BRC Retail Sales Monitor (YoY) (Feb) AUD – Retail Sales (MoM) (Jan) AUD – RBA Interest Rate Decision USD – Factory Orders (MoM) (Jan) CAD – Ivey PMI (Feb)
Events USD – FOMC Member Quarles Speaks AUD – RBA Rate Statement USD – FOMC Member Dudley Speaks
|
| Wednesday, March 7 |
Data CrudeOIL – API Weekly Crude Oil Stock AUD – GDP (QoQ) (Q4) GBP – Halifax House Price Index (YoY) (Feb) EUR – GDP (QoQ) (Q4) USD – ADP Nonfarm Employment Change (Feb) USD – ADP Nonfarm Productivity (QoQ) (Q4) CAD – Trade Balance (Jan) CAD – BoC Interest Rate Decision CrudeOIL – Crude Oil Inventories CrudeOIL – Gasoline Inventories
Events USD – FOMC Member Kaplan Speaks GBP – Annual Budget Release USD – FOMC Member Bostic Speaks USD – FOMC Member Dudley Speaks CAD – BoC Rate Statement
|
| Thursday, March 8 |
Data JPY – GDP (QoQ) (Q4) CNY – Trade Balance (USD) (Feb) EUR – Deposit Facility Rate EUR – ECB Interest Rate Decision (Mar) CAD – Housing Starts (Feb) USD – Initial Jobless Claims CAD – Building Permits (MoM) (Jan) CAD – New Housing Price Index (MoM) (Jan)
Events EUR – ECB Press Conference
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Friday, March 9
|
Data JPY – Household Spending (MoM) (Jan) CNY – CPI (YoY) (Feb) CNY – PPI (YoY) (Feb) JPY – BoJ Interest Rate Decision EUR – German Industrial Production (MoM) (Jan) EUR – German Trade Balance (Jan) GBP – Manufacturing Production (MoM) (Jan) GBP – Trade Balance (Jan) USD – Average Hourly Earnings (MoM) (Feb) USD – Nonfarm Payrolls (Feb) USD – Participation Rate (Feb) USD – Unemployment Rate (Feb) CAD – Employment Change (Feb) CAD – Unemployment Rate (Feb) CrudeOIL – US Baker Hughes Oil Rig Count
Events CAD – BoC Gov Poloz Speaks JPY – BoJ Monetary Policy Statement (YoY) JPY – BoJ Press Conference USD – FOMC Member Rosengren Speaks
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Technical Weekly Outlook: March 5 – 9
Dollar Index
DOLLAR_INDX, Daily: Dollar index was traded lower following prior retracement from the 60-MA line (green). MACD histogram which illustrate diminished upward signal and momentum suggests the index to extend its losses after closing below the 20-MA line (red).
Resistance level: 90.00, 91.30
Support level: 88.40, 86.80
GBPUSD
GBPUSD, Daily: GBPUSD was traded lower following prior breakout from the bottom level of narrowing triangle. However, recent rebound while coupled with diminishing downward momentum from MACD histogram suggests the pair to be traded higher in short-term as technical correction after closing above the psychological level of 1.3800.
Resistance level: 1.3800, 1.3970
Support level: 1.3600, 1.3400
USDJPY
USDJPY, Daily: USDJPY remained in a bearish trend following prior retracement from the 20-MA line (red). MACD histogram begins to form an imminent downward signal suggests further bearish bias. Thus, a close below the minor support at 105.45 is required to gain further validation.
Resistance level: 105.95, 108.40
Support level: 105.45, 103.35
EURUSD
EURUSD, Daily: EURUSD extended its recovery following prior rebound from the support level near 1.2170. MACD histogram which continues to illustrate diminishing downward momentum suggests the pair to advance further upwards after closing above the 20-MA line (red).
Resistance level: 1.2400, 1.2500
Support level: 1.2270, 1.2170
GOLD
GOLD_, Daily: Downside on the gold price remains limited following prior rebound from the strong support level at 1312.00. In tandem with recent price action, diminishing downward momentum from the MACD histogram suggests the commodity price to extend its upside bias after closing above the 60-MA line (green).
Resistance level: 1340.00, 1353.70
Support level: 1312.00, 1295.00
Crude Oil
CrudeOIL, Daily: Crude oil price remains traded within a narrowing triangle while recently rebounded from the support level at 60.80. Stochastic Oscillator which illustrate a rebound signal from the oversold region suggests the commodity price to be traded higher in short-term. Otherwise, long-term trend direction can only be determined following a successful breakout from either side of the triangle.
Resistance level: 63.75, 66.65
Support level: 60.80, 59.00