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10 February 2020                   Weekly Analysis

 

GCMAsia Weekly Report: February 10 – 15

Market Review (Forex): February 3 – 7

US Dollar

Greenback extended its gains during last week following the release of bullish economic data from the region. Last Friday, the dollar index closed last week’s market at 98.53 against a basket of six major currencies. According to ISM, both its Manufacturing PMI and Non-Manufacturing PMI notched in better-than-expected for the month of January, dialing down market speculation for an imminent economic slowdown in the United States. Both data came in at 50.9 and 55.5 versus forecast of 48.5 and 55.0 respectively.

 

In terms of employment data, ADP reported that its Nonfarm Employment Change for the month of January came in significantly higher with a reading of 291,000, confounding market forecast for a reading of up to 156,000. The data has spur bullish bets in the market upon the US dollar prior to the release of Nonfarm Payrolls report last Friday. As widely expected by the market, US Bureau of Labor Statistics reported that Nonfarm Payrolls for the month of January came in at 225,000, significantly higher than forecast of 160,000. Likewise, its previous month’s reading was adjusted higher from 145,000 to 147,000. However, gains on the greenback were limited after Unemployment Rate notched up by 0.1% to 3.6% for the month of January.

 

In terms of economic progression, fundamentals in the United States fared better than other nations such as the United Kingdom and China which both currently subjected to Brexit risks and coronavirus epidemic. While the market remains cautious over the spread of coronavirus to other regions, investors continues to enter into the US Treasuries and bonds market over the backdrop of a rebound in economic momentum.

 


 

USD/JPY

Pair of USD/JPY extended its gains last week while closing the market at 109.59. Japanese yen received extensive selloff in the FX market following multiple bullish economic data from the United States. The data has spurred higher expectation for a rebound in US economic momentum that could decrease the chances of further policy easing from the Federal Reserve later this year. However, gains on the pair remains limited as market participant continues to monitor the condition of coronavirus in China and other countries.

 

EUR/USD

Pair of EUR/USD was traded in a downtrend last week while closing the market at around 1.0945. Euro suffered from heavy selling pressure as US dollar climbs up last week following bullish economic data from the region. Likewise, recent dismal data from the Germany as well as ongoing Brexit risks in between the EU and UK has dragged down the appeal of euro towards investors.

 

GBP/USD

Pair of GBP/USD extended its losses last week while closing the market at 1.2880. Pound sterling received extensive selloff pressure since early last week due to rising Brexit risk in between UK and EU. Hard stances and status quo in between UK and EU may led to a possible “crash” in trade negotiation as early as April if both nation’s failed to backdown in order to reach consensus. This has increased the possibility of “hard” Brexit and thus reduces the appeal of pound sterling.

 

Market Review (Commodities): February 3 – 7

GOLD

Gold price rebounds from its lower level while closing last week’s market at $1,571.41 a troy ounce. The appeal for traditional safe-haven asset gold remains intact as coronavirus continues to spread around the Asian region mainly China, Japan and Singapore. The fear of an economic impact from the epidemic has spur a significant selloff in global equity which led to higher demand for safe-haven assets in the FX market. However, gains on the gold price were limited due to the appreciation of US dollar over the backdrop of strong economic data from the region.

 


 

Crude Oil

Crude oil price notched in its third consecutive weekly losses as it closes last week’s market at around $49.81 per barrel. Oil futures received significant bearish pressure over the backdrop of global oversupply as well as coronavirus’s impact upon global oil demand. Earlier last week, oil futures received some bearish pressure after Energy Information Administration reported that last week’s oil inventories were up by 3.355 million barrels, significantly higher than forecast of 2.831 million barrels.

 

Most investors’ remains pessimistic upon global oil market due to recent outbreak of coronavirus in China which has now spread to some Asian countries such as Japan and Singapore. The outbreak has caused few cities in China to shut down and this could jeopardize overall economic activity if the outbreak persists. As China is the world’s largest importer and exporter, a drawdown in economic activity could bring significant impact upon other countries whom relies on the country as its main trade partner.

 

Last week, OPEC+ panel has agreed upon a recommendation to extend current oil supply cut pact until the end of 2020 with more output restrictions in order to curb the impact of coronavirus on global oil demand. However, the plan was still in negotiations as Russia – one of its largest non-OPEC oil producer requests for more time to assess the impact of the epidemic prior to agreeing on extending and increasing the output cut limit.

 

Weekly Outlook: February 10 – 15

For the week ahead, investors will pay attention upon Reserve Bank of New Zealand monetary policy meeting as well as Core Retail Sales data from the United States. Both data may provide further market signal for New Zealand dollar and greenback.

 

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: February 10 – 15.

    Time Market Event Actual Forecast Previous
Tuesday – 11 February 2019
17.30 GBP GDP (MoM) -0.3%
17:30 GBP Manufacturing Production (MoM) (Dec) 0.5% -1.7%
22.00 EUR ECB President Lagarde Speaks
23.00 USD Fed Chair Powell Testifies
23.00 USD JOLTs Job Openings (Dec) 7.233M 6.800M
Wednesday – 12 February 2020
09.00 NZD RBNZ Interest Rate Decision 1.00% 1.00%
09.00 NZD RBNZ Rate Statement
09.00 NZD RBNZ Press Conference
Tentative GBP Autumn Budget
23.00 USD Fed Chair Powell Testifies
23.30 CrudeOIL Crude Oil Inventories 2.831M 3.355M
Thursday –13 February 2020
03.10 NZD RBNZ Gov Orr Speaks
08.15 CAD BoC Gov Poloz Speaks
21.30 USD Core CPI (MoM) (Jan) 0.2% 0.1%
Friday – 14 February 2020
15.00 EUR German GDP (QoQ) (Q4) 0.1% 0.1%
21.30 USD Core Retail Sales (MoM) (Jan) 0.3% 0.7%
Saturday – 15 February 2020
02:00 CrudeOIL U.S. Baker Hughes Oil Rig Count 676