6 January 2020 Weekly Analysis
GCMAsia Weekly Report: January 6 – 10
Market Review (Forex): December 30 – January 3
US Dollar
Greenback managed to recoup its earlier losses during last week while closing the market at around 96.55 against other major currencies. US dollar received some bullish support after other major currencies undergo technical correction following sharp rally since late December last year. However, gains on the currency remains limited following rising geopolitical tension and bearish data from the region.
On the geopolitical front, tension in between US and Iran has heightened to an all new high after Washington launched an air strike at Baghdad International Airport last week, killing several key members including Iranian General Qasem Soleimani. Subsequent to the attack, Iran President Hassan Rouhani warned that US President Donald Trump has made a “grave mistake” by launching the attack and he vows to take retaliate measures against United States. Rising risks in the market spurred a selloff upon US assets, which generally places bearish pressure upon US dollar.
In terms of economy, ISM Manufacturing PMI recorded its largest contraction in more than a decade during December to 47.2, missing economists forecast of 49.0. Although US and China managed to reach consensus upon phase 1 of trade deal, prior tension in between both countries has brought significant negative impact upon US economy. For the time being, investors will continue to pay attention upon upcoming data release from the US in order to gauge its economic momentum.
USD/JPY
Pair of USD/JPY extended its downward trend throughout last week while closing at 108.09. Safe-haven Japanese yen received higher demand following rising geopolitical tension in between US and China. Investors fear a war may breakout in between both countries after US initiated an attack which killed several key figures of the Iranian government. Following the attack, Iran President Hassan Rouhani warned that US made a “grave mistake” and they will pay for their “consequences”. Rising tension sparked a selloff in US equities which spurred the demand for safe-havens.
EUR/USD
Pair of EUR/USD was traded lower last week following bearish economic data from the region while closing at 1.1159. Euro received substantial selloff after Germany’s Unemployment Change for the month of December shows an increase up to 8,000 individuals, missing economist forecast for an increase of only 2,000 individuals. However, losses on the euro remains limited after Germany’s CPI for the month of December rose by 0.5%, significantly higher than prior reading of -0.8%.
GBP/USD
Pair of GBP/USD extended its losses throughout last week while closing at around 1.3075. Pound sterling’s appeal continues to diminish after UK Prime Minister Boris Johnson rejects to delay Brexit transition date and vows to complete UK’s exit from EU by 31st December 2020. Negotiations in between UK and EU which will began after Brexit official date on 31st January would only provide 11 months for both parties to reach a substantial deal. Investors worried that the given timeframe is too short and it may lead to “hard Brexit” if both parties fail to reach a consensus.
Market Review (Commodities): December 30 – January 3
GOLD
Gold price extended its gains throughout last week while closing the market at around $1,527.37 a troy ounce. Demand for safe-haven rose sharply following rising geopolitical tension in between US and Iran which sparked a selloff in US equities. Likewise, ongoing risk in the UK with regards to Brexit has also provided additional bullish support for the yellow commodity.
Crude Oil
Crude oil price rose sharply last week while closing the market at around $63.03 per barrel. Oil price extended its surge as tension in between US and Iran escalates following the assassination of one of the key figures of the Islamic republic. Deepening geopolitical crisis in between both countries may disrupt the supply of oil from the Middle East to other around the world, which would lead to shortages in the near future.
Similarly, ongoing downward trend in US oil inventories and drilling activities has provided further bullish support for the commodity. According to Energy Information Administration, US oil inventories for last week was down by 11.463 million barrels, significantly higher than forecast for a draw of up to 3.288 million barrels. Downward trending in terms of US oil inventories shows that market demand is slowly picking up which may help to ease global oil supply glut.
In addition, US Baker Hughes Oil Rig Count for last week shows that active drilling sites was down by 7 from 677 to 670. Closure of oil drilling sites may lead to lower oil output from the US whom are currently touted as world’s largest oil producer thus far.
Weekly Outlook: January 6 – 10
For the week ahead, investors would scrutinize upon economic data releases from the United States such as ISM Non-Manufacturing PMI, ADP Nonfarm Employment Change as well as Nonfarm Payrolls. In addition, traders would continue to focus upon geopolitical tension in between US and Iran in order to gauge market sentiment.
For the oil market, traders will place their attention upon weekly inventory reports from American Petroleum Institute (API) and Energy Information Administration (EIA) for more signals.
Highlighted economy data and events for the week: January 6 – 10.
| Time | Market | Data | Actual | Forecast | Previous |
| Monday – 6 January 2019 | |||||
| 17:30 | GBP | Composite PMI (Dec) | – | 48.6 | 48.5 |
| 17:30 | GBP | Services PMI (Dec) | – | 49.1 | 49.0 |
| Tuesday – 7 January 2019 | |||||
| 18:00 | EUR | CPI (YoY) (Dec) | – | 1.3% | 1.0% |
| 23:00 | USD | ISM Non-Manufacturing PMI (Dec) | – | 54.5 | 53.9 |
| 23:00 | CAD | Ivey PMI (Dec) | – | 53.8 | 60.0 |
| Wednesday – 8 January 2020 | |||||
| 05:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | -7.900M |
| 21:15 | USD | ADP Nonfarm Employment Change (Dec) | – | 156K | 67K |
| 23:30 | CrudeOIL | Crude Oil Inventories | – | -3.288M | -11.463M |
| Thursday – 9 January 2020 | |||||
| 18:00 | EUR | Unemployment Rate (Nov) | – | 7.5% | 7.5% |
| 20:30 | EUR | ECB Publishes Account of Monetary Policy Meeting | – | – | – |
| 21:30 | USD | Initial Jobless Claims | – | 222K | 222K |
| Friday– 10 January 2020 | |||||
| 03:00 | CAD | BoC Gov Poloz Speaks | – | – | – |
| 08:30 | AUD | Retail Sales (MoM) (Nov) | – | 0.3% | 0.0% |
| 21:30 | USD | Nonfarm Payrolls (Dec) | – | 160K | 266K |
| 21:30 | USD | Unemployment Rate (Dec) | – | 3.5% | 3.5% |
| 21:30 | CAD | Employment Change (Dec) | – | 22.5K | -71.2K |
| Saturday – 11 January 2020 | |||||
| 02:00 | CrudeOIL | U.S. Baker Hughes Oil Rig Count | – | – | 670 |