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8 May 2017                 Weekly Analysis

 

GCMAsia Weekly Report: May 8 – 12

Market Review (Forex): May 1 – 5

U.S. Dollar

Greenback loses its footing against other major peers following the release of US Nonfarm Payroll report while investors look ahead towards the second round of presidential election in France. The dollar index was down 0.19% to 98.53 after initially touching an almost six-months low of 98.41. For the week, the index has shed 0.37%, its fourth consecutive weekly decline.

 

According to the Labor Department, US economy has added 211,000 jobs last month, beating expectations for a gain of 185,000 while unemployment rate ticked down to 4.3%, nearing the lowest level in 10 years. The report also showed that prior month’s figure of 98,000 was revised down to an even lower of 79,000, causing disappointment among investors.

 

The jobs report did little to alter the view of Federal Reserve in raising their interest rate in June. Markets are pricing around 74.1% for a chance of rate hike in June as per Fed Rate Monitor Tool.

 

US Nonfarm Payrolls

—– Forecast

The US economy has added 211,000 jobs during April, exceeding expectations of 185,000.

 

US Unemployment Rate

—–Forecast

US Unemployment rate was down 0.1% and currently stands at 4.4%.

 

Fed Rate Monitor Tool

Fed Rate Monitor Tool shows that the market is currently pricing in at 74.1% for a chance of rate hike in June.

 

USD/JPY

US dollar was higher against the yen, with pairing of USD/JPY up 0.22% to 112.71 last Friday.

 

EUR/USD

Euro was traded at $1.0998, its strongest level since early November during last Friday as expected victory of Emmanuel Macron would be a sign that political risk in Europe is subsiding.

 

 

GBP/USD

Great British Pound rose against its dollar counterpart, up 0.45% to seven-months high of $1.2980.

 

 

Market Review (Commodities): May 1 – 5

GOLD

Gold prices retraced its gains on last Friday after data showed a strong rebound in US jobs growth last month which has underlined higher expectations for an interest rate hike in June. Gold for June delivery was settled at $1,229.01, off from earlier high of $1,236.00. Overall, gold price has ended the week with 3.26% lower, its largest weekly decline since last November. Expectation for faster pace in rate hike will place pressure on gold price which is denominated in dollars. It struggles to compete with yield bearing assets when borrowing costs arises.  In addition, fading Eurozone political risks also weighed on the safe haven demand, well ahead of Sunday’s second round vote in the French presidential election.

 

Crude Oil

Oil futures settled higher last Friday while registering a hefty loss for the week as rising signs of a rebound in US shale production continues to feed concerns over global supply glut. Crude oil price was up 1.5% while closing the week at $46.22 a barrel. It has plunged almost 5% on Thursday after hitting its lowest level since November at $43.76.

 

In the recent week, crude oil price came under pressure amid fears of ongoing rebound in US shale production could derail efforts of other major producer in rebalancing global oil supply and demand. Likewise, US drillers last week added 6 additional rigs, sending its total to a 11-months high of 703 thus far. The relentless increase in US output has overshadowed pledged output cuts that is initiated by Organization of the Petroleum Exporting Countries (OPEC).

 

Members and non-members of OPEC will be meeting in Vienna on May 25th to discuss the possibility to extend their production cut deal to second half of the year in order to clear a supply glut which was failed to reduce thus far.

 

U.S. Baker Hughes Oil Rig Count

Active oil drilling rig in US was increased by 6 last week to a total of 703 thus far.

 

Weekly Outlook: May 8 – 12

The outcome of French presidential election is likely to set the tone in financial markets this week. Likewise, investors will be looking ahead to Friday’s US data on inflation and retail sales to gauge overall performance of their economy if it is sufficient to support the case for an interest hike in June. In addition, monetary policy meeting in the UK and New Zealand will also be in focus.

 

As for oil traders, they will keep an eye on fresh weekly information on US stockpiles of crude and refined products due Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer. Otherwise, investors will also keep an eye on the OPEC’s monthly report for further evidence they are complying with their agreement to reduce daily output since early of the year.

 

Highlighted economy data and events for the week: May 8 – 12

Monday, May 8  

Data

AUD – Building Approvals (MoM) (Apr)

AUD – NAB Business Confidence (Apr)

CNY – Trade Balance (USD) (Apr)

GBP – Halifax House Prince Index (MoM) (Apr)

 

Events

N/A

 

Tuesday, May 9  

Data

AUD – Retail Sales (MoM) (Mar)

CAD – Building Permits (MoM) (Mar)

USD – JOLTs Job Openings (Mar)

Crude Oil – API Weekly Crude Oil Stock

 

Events

N/A

 

Wednesday, May 10  

Data

CNY – CPI (YoY) (Mar)

CNY – PPI (YoY) (Mar)

USD – Import Price Index (MoM) (Apr)

Crude Oil – Crude Oil Inventories

 

Events

EUR – ECB President Draghi Speaks

 

Thursday, May 11  

Data

NZD – RBNZ Interest Rate Decision

GBP – Manufacturing Production (MoM) (Mar)

GBP – BoE Interest Rate Decision (May)

USD – PPI (MoM) (Apr)

 

Events

NZD – RBNZ Rate Statement

NZD – RBNZ Gov Wheeler Speaks

GBP – BoE Inflation Report

GBP – BoE MPC Meeting Minutes

Crude Oil – OPEC Monthly Report

 

 

Friday, May 12

 

 

Data

EUR – German GDP (QoQ) (Q1)

USD – Core CPI (MoM) (Apr)

USD – Core Retail Sales (MoM) (Apr)

USD – Retail Sales (MoM) (Apr)

Crude Oil – U.S. Baker Hughes Oil Rig Count

 

Events

N/A

 

 

Technical weekly outlook: May 8 – 12

Dollar Index

DOLLAR_INDX, Daily: Dollar index remains traded within a downward channel while recently retraced from the resistance level of 99.20. Recent retracement suggests dollar index to be traded lower, towards the bottom level of the channel.

 

Resistance level: 99.20, 100.95

Support level: 97.80, 96.40

 

GBPUSD

GBPUSD, Daily: GBPUSD has extended its gains following prior formation of golden cross by both MA lines. However, recent retracement and MACD indicator which begins to drift outside of upward momentum suggests GBPUSD to be traded lower in short-term as technical correction. Long-term trend direction still suggests GBPUSD to move further upwards.

 

Resistance level: 1.3000, 1.3130

Support level: 1.2855, 1.2715

 

USDJPY

USDJPY, Daily: USDJPY has recently breakout from the top level of downward channel, signaling a change in trend direction to move further upwards. A closure above the resistance level of 113.40 would suggest USDJPY to extend its upward momentum.

 

Resistance level: 113.40, 114.60

Support level: 112.15, 110.60

 

EURUSD

EURUSD, Daily: EURUSD remains traded within an upward channel while recently retraced from the resistance level of 1.1020. Recent retracement suggests EURUSD to be traded lower towards the target of support level at 1.0920.

 

Resistance level: 1.1020, 1.1120

Support level: 1.0920, 1.0820

 

GOLD

GOLD_, Daily: Gold price has recently slipped out from the bottom of upward trend line, signaling a change in trend direction to move further downwards. As the MACD histogram indicator illustrates downward signal and momentum, gold price is suggested to move further downwards after breaking the support level of 1129.35.

 

Resistance level: 1254.60, 1295.35

Support level: 1229.35, 1208.95

 

Crude Oil

CrudeOIL, Daily: Crude oil price was traded higher following prior rebound from the support level of 45.30. As the downward momentum from MACD histogram begins to subside, crude oil price is expected to be traded higher in short-term as technical correction. Long-term trend direction is suggested to extend its downward momentum.

 

Resistance level: 47.20, 49.10

Support level: 45.30, 42.65

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