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03 October 2022                                Weekly Analysis

GCMAsia Weekly Report: October 03 – 07

Market Review (Forex): September 26 – 30

US Dollar

The Dollar Index which traded against a basket of six major currencies lost its ground after hitting the recent high level at 114.65 earlier last week, as a series of mixed data diminished the market positive sentiment.

 

Early last week, the hawkish expectation from the Federal Reserve continued to boost the gains of dollar index as market participants were still digesting a large rate hike in the upcoming meetings. According to the latest Fed statement, Jerome Powell claimed that the Fed will act aggressively to stabilize the inflationary pressures at 2%. On the economic data front, a series of positive data also boosted the shininess of the dollar index earlier last week. According to Conference Board, the US CB Consumer Confidence in September notched up from the previous reading of 103.6 to 108.0, exceeding the market forecast of 104.5. Besides, the US New Home Sales had also increased from the prior figure of 532K to 685K, far higher that consensus expectation of 500K. A series of bullish data had indicated that the US economy is beginning to show signs of improvement, which dialed up the market optimism toward economy progression in the US.

 

However, the gains of the dollar index were limited after UK government decided to purchase long-dated bond to stabilize the financial system in the United Kingdom. With such a backdrop, the global investors shifted their capital from the US dollar to Pound market amid the expectation of such as stimulus program would able to save the UK economy from recession. Besides, the weak US GDP data also disrupted the market sentiment of the dollar index. According to the Bureau of Economic Analysis, the US GDP data for quarter from April through June came in at -0.6%, in line to the economist forecast. The heightening of recessionary risk dampened the dollar market, urged the investors to flee away from the market.

 

USD/JPY

The pair of USD/JPY hovered last week while closing its market price at 144.75. Following the intervention of currency market, the Japanese yen market remains as the last choice of the market participants to invest in. This is mainly attributed to the Bank of Japan (BoJ) loosening monetary policy, where no sign of turning the table in the meantime. Therefore, with the ultra-easing policy, the investors continued to sell-off their Japanese yen’s holdings and entered into the other currency market.

 

EUR/USD

The pair of EUR/USD appreciated last week while closing its market price at 0.9805. The overall long-term trend in the Euro market remains strong despite a slight rebound throughout the last week. The rebound of the pair of EUR/USD was mainly attributed to the weakening of dollar index. Besides, a series of positive economic data also boosted the shininess of the Euro. According to the Eurostat, the Eurozone CPI data came in at 10.0%, significantly higher than the economist forecast at 9.7%, contrary to the market expectation of recessionary risk weighing on the economy. At the same time, the Germany Unemployment Change data also came in at 14K, far lower than the economist forecast at 20K, showing on-track recovery in the Germany labor market. A series of positive economic data revived the value euro to a higher-level last week.

 

GBP/USD

The pair of GBP/USD appreciated last week while ending last week session at the price of 1.1418. According to CNBC, the Bank of England (BoE) would start buying long-dated bonds in order to restore market functioning and reduce any risks contagion to credit conditions for UK household and businesses. The monthly rise of yields of UK government bonds has spiked to a high level since 1957 as the market participants had flee away from the UK fixed income market, after the fiscal policy has been announced. The bond purchase started from 28 September and the central bank will stop purchasing it on 14 October. Besides, the bank’s Financial Policy Committee had acknowledged that the dysfunction in the gilt market caused a material risk to the country’s financial stability. Thus, they decided to take action immediately. The move from BoE would stimulate the nation spending in short-term period, which brought positive prospects toward economic progression in UK. Hence, the value of the Pound reversed its bearish trend to bullish for a short time of period.

 

Market Review (Commodities): September 26 – 30

GOLD

Gold price appreciated last week while closing its market price at $1665.65 per troy ounce. Throughout the last week, the gold price surged stably, helped by falling of treasury yield. Last week, the Bank of England (BoE) said it would buy long-dated British bonds in a move aimed at restoring financial stability in markets rocked globally by the fiscal policy of the new government in London. With that, it pushed the yields lower on treasuries with maturities six months and longer, dragged down the dollar index while spurred the yellow metal sentiment. Moreover, with the ongoing geopolitical tension between Ukraine and Russia, the yellow metal received further bullish momentum throughout the week.

 

CrudeOIL

Crude oil price extended its gains while ending last week session at the price of $81.85 per barrel. Last week, the black commodity price surged significantly as the hurricane Ian likely to reduce the supply of the oil, worsening the imbalance of demand and supply in the global market. Besides, the draw in US oil inventory has also spurred the black commodity price to a higher level. According to the EIA institute, the crude oil inventories decreased by 0.215M barrel, missing the market expectation of 0.443M increase. Furthermore, the crude oil price also surged on speculation of larger OPEC+ production cut last Friday. According to the latest news, OPEC+ will consider an oil output cut of more than a million barrels per day (bpd) next week in what would be the biggest move yet since the COVID-19 pandemic to address oil market weakness. Therefore, the investors should and will continue to eye on the upcoming OPEC+ meeting which scheduled on 5th of October to scrutinize the further direction of this black commodity product.

 

Weekly Outlook: October 3 – 7

For the week ahead, investors would continue to focus on crucial event such as the Nonfarm Payrolls and Unemployment Rate this week to determine further direction. Besides that, the ongoing situation with Ukraine-Russia war will also be in the eyes of investors.

 

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: October 3 – 7

Time Market Event Actual Forecast Previous
Monday – 3rd October 2022
All Day CNY China – National Day
7:50   JPY Tankan Large Manufacturers Index (Q3) 8 11 9
7:50   JPY Tankan Large Non-Manufacturers Index (Q3) 14 13 13
15:55   EUR German Manufacturing PMI (Sep) 48.3 48.3
16:30   GBP Manufacturing PMI (Sep) 48.5 48.5
22:00   USD ISM Manufacturing PMI (Sep) 52.2 52.8
Tuesday – 4th October 2022
All Day CNY China – National Day
11:30   AUD RBA Interest Rate Decision (Oct) 2.85% 2.35%
11:30   AUD RBA Rate Statement
22:00   USD JOLTs Job Openings (Aug) 10.650M 11.239M
23:00   EUR ECB President Lagarde Speaks
Wednesday – 5th October 2022
All Day CNY China – National Day
4:30   USD API Weekly Crude Oil Stock 4.150M
8:30   AUD Retail Sales (MoM) 0.60% 0.60%
9:00   NZD RBNZ Interest Rate Decision 3.50% 3.00%
9:00   NZD RBNZ Rate Statement
16:30   GBP Composite PMI (Sep) 48.4 48.4
16:30   GBP Services PMI (Sep) 49.2 49.2
20:15   USD ADP Nonfarm Employment Change (Sep) 205K 132K
22:00   USD ISM Non-Manufacturing PMI (Sep) 56 56.9
22:30   USD Crude Oil Inventories -0.215M
Thursday – 6th October 2022
All Day CNY China – National Day
16:30   GBP Construction PMI (Sep) 48 49.2
19:30   EUR ECB Publishes Account of Monetary Policy Meeting
20:30   USD Initial Jobless Claims 203K 193K
22:00   CAD Ivey PMI (Sep) 60.9
Friday – 7th October 2022
All Day CNY China – National Day
9:30   CNY Caixin Manufacturing PMI 49.5
9:30   CNY Manufacturing PMI 49.4
18:00   EUR EU Leaders Summit
20:30   USD Nonfarm Payrolls (Sep) 250K 315K
20:30   USD Unemployment Rate (Sep) 3.70% 3.70%
20:30   CAD Employment Change (Sep) 20.0K -39.7K