11 January 2021 Weekly Analysis
GCMAsia Weekly Report: January 11 – 15
Market Review (Forex): January 4 – 8
US Dollar
The dollar index which traded against a basket of six major currency pairs rebounded from two-year lows on last week over the backdrop of a string of upbeat economic data as well as hawkish statement from the Federal Reserve had dialed up market optimism toward the economic progression in the Unites States, which insinuating market demand on the US Dollar. The Dollar Index was closing its price on last Friday session at the price of 90.20.
In fact, the US Dollar extended its rebound amid sharp gains in U.S. yields had prompted investors to shift their portfolio from other region into United States. As for now, market participants expected that the President-elect Joe Biden, who takes office on 20th January with Democrats able to control both house of Congress, had boosted up the market confident toward the economic outlook in the United states, while pushing the US 10-year treasury yield up more than 20 basis points to 1.1185% this year, which spurring the market demand on the US Dollar. Besides, a few policymakers, including Chicago Fed President Charles Evans and Atlanta’s Raphael Bostic, said last week that they might support to reduce the pace of bond buying by the year-end if the economy rebounded significantly. Lower bond buying process would decreasing the money supply in circulation, which spurring further bullish momentum for the US Dollar. On the economic data front, most of the crucial economic data for last week were dominated by upbeat reading, despite some of the results fared worse than economic expectation. On the positive note, the U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) had notched up significantly from the previous reading of 55.9 to 57.2, exceeding the market expectation at 54.6. Besides, the U.S. Initial Jobless Claims and U.S. Unemployment Rate both came in at 57.2 and 6.7%, which both fared better than the market expectation at 54.6 and 6.8% respectively. Nonetheless, the gains experienced by the US Dollar is limited amid bearish US Nonfarm Payrolls data on last week. According to Bureau of Labor Statistics, the U.S. Nonfarm Payrolls had declined significantly from the previous reading of 336K to -140K, worse than the market forecast at 71K.
Nonetheless, as of now investors would continue to scrutinize the latest updates with regards of the Covid-19 vaccine development as well as further crucial economic data in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 103.93. The overall bullish momentum for the pair was mainly due to the appreciation of the US Dollar. Besides, the positive development with regards of the Covid-19 vaccines had also dragged down the appeal of the safe-haven Japanese Yen. According to CNBC, a coronavirus vaccine which developed by Pfizer and BioNTech appears to be effective against a key mutation in the more infection’s variants of the Covid-19 discovered in the U.K. and South Africa.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.2280. The overall bearish momentum for the pair of EUR/USD was mainly due to appreciation of the US Dollar. Nonetheless, due to the lack of crucial economic data from the European region within a short-term period, investors would continue to wait for more catalyst before entering the market for Euro.
GBP/USD
The pair of GBP/USD was edged lower on last week while closing its market price at 1.3505. Pound Sterling slumped following the UK Prime Minister reimposed a harsh lockdown in England on Monday as a more transmissible variant of Covid-19 fuels a surge in infections and hospitalization in the country. According to CNN, UK Prime Minister Boris Johnson reimposed measures similar to the first lockdown last spring, including closures of primary and secondary schools. In fact, people will be only allowed to leave their homes for limited reasons like shopping for essentials, exercise and medical assistance. On the Covid-19 pandemic front, the UK had recorded a new daily Covid-19 infection with more than 50,000 cases in nearly a week, and hospitalizations exceed April’s peak. Meanwhile, there were 30% more Covid-19 patients in hospitals in England on Monday than a week earlier.
Market Review (Commodities): January 4 – 8
GOLD
Gold price slumped tremendously throughout last week with the price of $1829.85 troy ouns amid sharp gains in U.S. yields had prompted investors to shift their portfolio from other asset to US bond market. As for now, market participants expected that the President-elect Joe Biden, who takes office on 20th January with Democrats able to control both house of Congress, had boosted up the market confident toward the economic outlook in the United states, while pushing the US 10-year treasury yield up more than 20 basis points to 1.1185% this year, which diminishing the market demand on the safe-haven gold. Besides, a few policy markets, including Chicago Fed President Charles Evans and Atlanta’s Raphael Bostic, said this week that they might support to reduce the pace of bond buying by the year-end if the economy rebounded significantly. Lower bond buying process would decreasing the money supply in circulation, which further dragging down the appeal for the gold.
CrudeOIL
The price of crude oil surged throughout the week while closing last Friday session with the price of $52.71 per barrel amid the positive Covid-19 vaccine development had spurred market optimism toward the crude oil demand in future. Besides, the crude oil price extends its gains over the backdrop of upbeat inventory data from EIA last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories had reduced significantly from the preliminary reading of -6.065M to -8.010M, much lesser than the market forecast at -2.133M. Nonetheless, the gains experienced by the crude oil price was limited following some region such as UK and US had imposed Covid-19 restrictions, which spurring negative prospect for the crude oil demand. As for now, investors would continue to scrutinize the latest updates with regards of the Covid-19 development in order to receive further trading signal.
Weekly Outlook: January 11 – 15
For the week ahead, investors would continue to focus on crucial economic data such as GDP data from the region of U.K. and also Covid-19 development in order to determine further direction.
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: January 11 – 15
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 11st January 2021 | |||||
| 08:30 | AUD | Retail Sales (MoM) (Nov) | – | 7.0% | – |
| Tuesday – 12nd January 2021 | |||||
| 20:00 | USD | EIA Short-Term Energy Outlook | – | – | – |
| 23:00 | USD | JOLTs Job Openings (Nov) | – | – | 6.652M |
| Wednesday – 13rd January 2021 | |||||
| 21:30 | USD | Core CPI (MoM) (Dec) | – | 0.1% | 0.2% |
| 23:30 | CrudeOIL | Crude Oil Inventories | – | -2.133M | -8.010M |
| Thursday – 14th January 2021 | |||||
| 15:00 | EUR | German GDP (QoQ) | – | – | 8.5% |
| 20:30 | EUR | ECB Monetary Policy Statement | – | – | – |
| 21:30 | USD | Initial Jobless Claims | – | 780K | 787K |
| Friday – 15th January 2021 | |||||
| 01:30 | USD | Fed Chair Powell Speaks | – | – | – |
| 15:00 | GBP | GDP (MoM) | – | – | 0.4% |
| 15:00 | GBP | Manufacturing Production (MoM) (Nov) | – | 1.0% | 1.7% |
| 21:30 | USD | Core Retail Sales (MoM) (Dec) | – | -0.1% | -0.9% |
| 21:30 | USD | PPI (MoM) (Dec) | – | 0.3% | 0.1% |
| 21:30 | USD | Retail Sales (MoM) (Dec) | – | -0.2% | -1.1% |