24 August 2020 Weekly Analysis
GCMAsia Weekly Report: Aug 24 – 28
Market Review (Forex): Aug 17– 21
Dollar index which gauges its value against a basket of six major currencies was having mixed pattern last week while successfully ended higher at last Friday trading session despite resurgence of second wave virus and increasing of geopolitical tensions between US and China.
On pandemic front, US are still the most affected country in global wide where its confirmed cases have risen to 5.8 million and death toll increased to 180K as of last week. Despite the pandemic still hitting the US economy condition, stalemate between the two biggest parties – Democrats and Republican remains while no willingness of tolerations being seen from both parties in the negotiation. In details, Democrats proposed 3 trillion in aid, while Republican insists with a far lower amount of relief plan which near to 1 trillion only. The negotiation deadlock limited the economy’s recovery pace, suppressing the US labour market in unprecedented historical worst situation. As of now, investors are still eyeing on the further talks between these two parties in order to scrutinize the direction of dollar index.
On geopolitical front, tension between US and China heightened after Trump administration decided to expand their restriction against Huawei Technologies last week. On last Monday, US Commerce Department has announced that they have banned the giant technology company in China from accessing US local chip market. In details, 38 companies all directly affiliated with Huawei Company across 21 countries will be affected by the blacklisting measure from US. After US make such announcement, China criticized US and emphasized that Beijing will take all necessary measures to protect their companies legitimate interests. The exacerbating of US-Sino tensions lifted the market preferences over the safe haven asset, prompted the investor to flee away from dollar market amid huge uncertainty risk.
The pair of USD/JPY was traded lower last week while ending last Friday session at the price of 105.80. USD/JPY received huge bearish momentum throughout the entire last week amid weakening of dollar dragged down the appeal of USD/JPY. Besides, heightening of tensions between US and China also triggered the market participant safe haven behavior, urging the investor to move their portfolio from riskier asset to safe haven Yen to avoid suffering from worries over market uncertainty risk.
The pair of EUR/USD plunged on last week while closing last Friday’s trading session with the price of 1.1795. The single currency Euro was being ‘threw away’ tremendously by the market participants last week despite the recent economic data from Europe such as CPI and Manufacturing PMI data showed some sign of recovery in their economy. On the other side, the Vice President from ECB De Guindos revealed that Europe economy are most likely unable to recover from the shuttering of economy due to fallout of covid-19. More economic data will be eyed by the investors to determine the future direction of EUR/USD.
The pair of GBP/USD was traded lower last week while closing its market at 1.3085. The bearish momentum which continued sweeping off the entire pound market was mainly contributed by the deadlock situation in UK and EU Post-Brexit trade talk. According to the latest news, UK and EU still holding different opinion on major issues such as fisheries and single custom market membership. In the trade talk, UK insists to have fully control over their water, while ruled out the possibility of leaving foreign fish boats in their water area. Moreover, Britain intended to continue their benefit of being parts of the single market in Europe where their goods and services can be freely traded after UK officially withdraw from Europe. Different opinion put the negotiation in circles, no breakthrough in last week despite UK reiterated that they will leave EU no matter there is a deal or not.
Market Review (Commodities): Aug 17 – 21
Gold price was traded lower in overall last week while closing its market on Friday at $1939.35 per troy ounce. This yellow metal market sentiment remained blurs as investors were putting their attention over the development of vaccine in order to gauge the further market behavior. Despite there was lack of updates from the vaccine development, yet the gold price still surged significantly in the beginning of last week as tensions between US and China sparked the markets risk-avoidances, urging investors to seek for safe haven asset. Besides, a series of bleak economic data from US also turned the dollar market sourer, which simultaneously pushed investors to hold safe haven asset in their portfolio to avoid losses.
The crude oil price was traded lower in overall on last week while closing last Friday session with $42.25 per barrels as mixed inventories data and latest updates from OPEC+ blurred the market view over the crude oil products.
On data front, US API Weekly Crude Oil Stock came in at -4.264M, surprisingly appeared larger draw than the market economist expectation at -2.900M. Despite, US EIA Crude Oil Inventories data showed a draw of 1.6 million barrels only, higher than the economist forecast at -2.670M, indicating that the demand of oil eased amid ongoing pandemic. On the other side, crude oil price underwent volatile and huge movement of trading before end of the week as OPEC+ announced that they will have to offset their overproduction between the period of May and July in the upcoming two months in order to fulfilled their commitment of production cut plan. OPEC and its allies would need to slash output by an extra 2.31 million barrels per day in the month of August and September in order to make up the oversupply.
On geopolitical front, heightening of tensions between US and Iran has also put some uncertainty risk into this black commodity supply side. Last week, US seized Iran’s oil tanker which was initially headed to Venezuela as it violated the US sanctions, where no fuels are allowed to be shipped to Venezuela. This largest government seizure of fuel shipment from Iran further lifted up the tensions between these two countries, since US exited the nuclear deal with Iran two years ago.
As of now, market participants continue eyes on the upcoming inventories data and development of geopolitical tensions in order to scrutinize the direction of oil price.
Weekly Outlook: Aug 24 – 28
For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, trade tensions between U.S. and China and also crucial economic data such as US GDP data in order to receive further trading signals.
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: August 24 – 28
|Monday – 24th August 2020|
|Tuesday –25th August 2020|
|14:00||EUR||German GDP (QoQ) (Q2)||–||-10.1%||-2.2%|
|16:00||EUR||German Ifo Business Climate Index (Aug)||–||92.0||90.5|
|22:00||USD||CB Consumer Confidence (Aug)||–||93.0||92.6|
|22:00||USD||New Home Sales (Jul)||–||786K||776K|
|Wednesday – 26th August 2020|
|04:30||CrudeOIL||API Weekly Crude Oil Stock||–||–||-4.264M|
|20:30||USD||Core Durable Goods Orders (MoM) (Jul)||–||2.1%||3.6%|
|22:30||CrudeOIL||Crude Oil Inventories||–||–||-1.632M|
|Thursday – 27th August 2020|
|20:30||USD||GDP (QoQ) (Q2)||–||-32.6%||-32.9%|
|20:30||USD||Initial Jobless Claims||–||1,000K||1,106K|
|21:10||USD||Fed Chair Powell Speaks||–||–||–|
|22:00||USD||Pending Home Sales (MoM) (Jul)||–||4.5%||16.6%|
|Friday – 28th August 2020|
|20:30||CAD||GDP (MoM) (Jun)||–||5.3%||4.5%|
|21:05||GBP||BoE Gov Bailey Speaks||–||–||–|
|22:00||USD||Michigan Consumer Sentiment (Aug)||–||72.8||72.5|