4 January 2020 Weekly Analysis
GCMAsia Weekly Report: January 4 – 8
Market Review (Forex): December 28 – January 1
US Dollar
The dollar index which traded against a basket of six major currency pairs failed to recoup its losses while posting the lowest level in two years as the US economy is still struggling in the fallout of pandemic while investors expecting more stimulus plan in year 2021.
Earlier last week, dollar index was managed to recover part of its losses as US President has eventually signed off the $900 billion stimulus plan into law, lifting the market worries over the lapse of unemployment benefit to prevent an estimated 14 million people from losing unemployment insurance. Prior to now, US President Donald Trump remained its hard stance while insisting the stimulus plan is too small and insufficient to support the US economy, where he requested the Congress to increase the stimulus check amount from $600 to $2000. Despite, the expectation of more stimulus and fiscal support from government and US central bank continue weigh on the dollar index. Investors are betting that Joe Biden will implement further stimulus plan in order to boost the US economy. Nonetheless, the market movement was slow during last week as thin trading behavior in Christmas and New Year holidays.
As of now, market participants are waiting for more catalyst in year 2021 to determine to further direction of dollar index, while keeping their eyes over the development of pandemic around the world.
USD/JPY
The pair of USD/JPY was traded lower throughout the week while closing at the price of 103.24. The main contribution of bearish momentum against this pair of currency was sourced from the higher expectation of more stimulus plan in US which could further depreciates the value of US dollar. Besides, the exacerbating of global pandemic cases has also further lifted the appeal of safe-haven Japanese yen. In this week, investors will continue eyes on economic data such as services PMI to gauge the direction of this currency pair.
EUR/USD
EUR/USD managed to extend its gains throughout last week while closing with the price of 1.2215. After months of negotiation of Post-Brexit trade deal, EU and UK has eventually reached a consensus where allowing UK to leave the single custom union on 31st of December 2020. Both sides have come a long way since the summer of 2016, when a referendum on EU membership saw almost 52% of British voters elect to leave the EU, and 48% vote to remain. A soft Brexit from UK is seeing as the best solution for both sides as it can avoid complicated trading relationship in future.
GBP/USD
The pair of GBP/USD have traded higher in overall while ending the market at the price of 1.3670. Despite with the increasing concerns of new coronavirus strain in the U.K, the milestone of reaching a deal between UK and EU has sparked up the value of pound sterling. On 1st of January 2021, a new chapter has begun in the history of Britain’s relationship with the rest of Europe. Exiting the bloc represented a chance to regain power over the U.K.’s decision-making, however much uncertainty lies ahead.
Market Review (Commodities): December 28 – January 1
GOLD
Gold price was traded higher throughout the week while ending the week with a gain at the price of 1900.40 as market participants are expecting bigger stimulus and fiscal support in the future after Joe Biden take office as the next US President. Besides, the new coronavirus strain in UK increased the market worries as the mutated virus registered a higher reproduction rate which up to 70% more transmissible than the previous dominant virus in UK. According to the latest statistics, several countries have reported mutated virus cases which included France, Australia, Canada and so on. The outbreak of new variant coronavirus has increased the market worries while urging the investors to move their capital into this safe haven yellow metal.
CrudeOIL
The price of crude oil has managed to recoup most its losses before experiencing a sharp drop at the end of the week, but still closing the market at a loss with the price of 48.40. The outbreak of mutated virus in UK and upbeat inventories data causing the market sentiment mixed.
At the earlier half of the week, the commodity has experience huge buying pressure as API has reported an unexpected draw down in US crude oil inventory level. According to the data, API Weekly Crude Oil Stock came in at -4.785M, missing the economist forecast at -2.100M, exerting positive sentiment in this black commodity market. Besides, EIA crude oil inventories also fall more than expected in latest week. In details, crude inventories fell by 6.065M, compared with the analyst’s expectation for a 2.583M drop. Despite, the gains of this oil product was limited as the new strain of covid-19 virus in UK threatened more lockdowns across the Europe. If the development of mutated virus triggers another round of countries lockdown, it would definitely curb the recovery in global oil consumption.
As of now, market participants are waiting for more catalyst to determine the direction of crude oil price such as upcoming OPEC+ meeting and further crude oil inventories data.
Weekly Outlook: January 4 – 8
For the week ahead, investors would continue to focus on the development of new coronavirus as well as economic data such as NFP data to determine the currencies further direction.
As for oil traders, they will be also 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: January 4 – 8
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 4hb January 2021 | |||||
| 16:55 | EUR | German Manufacturing PMI (Dec) | – | 58.6 | 58.6 |
| 17:30 | GBP | Manufacturing PMI (Dec) | – | 57.3 | 57.3 |
| Tuesday – 5hb January 2021 | |||||
| 16:55 | EUR | German Unemployment Change (Dec) | – | 10K | -39K |
| 23:00 | USD | ISM Manufacturing PMI (Dec) | – | 56.5 | 57.5 |
| Wednesday – 6hb January 2021 | |||||
| 17:30 | GBP | Composite PMI (Dec) | – | 50.7 | 50.7 |
| 17:30 | GBP | Services PMI (Dec) | – | 49.9 | 49.9 |
| 21:15 | USD | ADP Nonfarm Employment Change | – | – | 307K |
| 22:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 23:30 | USD | Crude Oil Inventories | – | – | -6.065M |
| Thursday – 7hb January 2021 | |||||
| 03:00 | USD | FOMC Meeting Minutes | – | – | – |
| 17:30 | GBP | Construction PMI (Dec) | – | 55.0 | 54.7 |
| 18:00 | EUR | CPI (YoY) (Dec) | – | -0.2% | -0.3% |
| 20:30 | EUR | ECB Monetary Policy Statement | – | – | – |
| 21:30 | USD | Initial Jobless Claims | – | 833K | 787K |
| 23:00 | USD | ISM Non-Manufacturing PMI (Dec) | – | 54.6 | 55.9 |
| 23:00 | CAD | Ivey PMI (Dec) | – | 54.7 | 52.7 |
| Friday – 8hb January 2021 | |||||
| 21:30 | USD | Nonfarm Payrolls (Dec) | – | 100K | 245K |
| 21:30 | USD | Unemployment Rate (Dec) | – | 6.8% | 6.7% |
| 21:30 | CAD | Employment Change (Dec) | – | -5.0K | 62.1K |