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29 August 2022                                  Weekly Analysis

GCMAsia Weekly Report: August 29 – September 2

 

Market Review (Forex): August 22- 26

US Dollar

The Dollar Index which traded against a basket of six major currencies continued to hover near the 20-year highest level as the market participant were waiting for the Jackson Hole Symposium, whereby the Federal Reserve Chairman would finally present his long-awaited view on the rate hike plan.

 

During earlier of the week, the dollar index muted ahead of the Jerome Powell speech as investors were waiting for further rate hike signal from the Fed Chairman. Then, the greenback managed to extend its gains with a large step before the market entered the weekend as Federal Reserve Chairman Jerome Powell vowed that aggressive rate hikes will be continued at this point in time. During the Jackson Hole Symposium, Jerome Powell finally presented his long-awaited view on the rate hike plan, whereby he said that the central bank’s job of cooling down the overheating economy is not done yet, mirroring that the Fed will not back off from increasing the interest rate aggressively. Besides, Jerome Powell warned that “in order to restore the price stability, it will likely require maintaining a restrictive policy stance for some time as the historical record cautions strongly against easing the policy too soon.” Powell also revealed that the economy needed more rate hikes, with “another unusually large” increase still on the table for the next meeting. Following the hawkish statement from the Chairman of the Fed, the possibility of a 75-basis point of a rate hike in the upcoming September meeting jumped from the prior week’s reading of 47.0% to 61.0%.

 

Going forward, the market participant would eye on the upcoming NFP data, which will be released on Friday night, in order to scrutinize the further direction of the dollar index.

 

USD/JPY

The pair of USD/JPY rebounded last week while closing its market price at 138.35. The dovish statement from Bank of Japan (BoJ) has spurred the upward trend of the currency pair. According to Reuters, the BoJ board member Toyoaki Nakamura claimed on Thursday that the central bank would maintain its ultra-low rates in order to tackle the current economy slowdown. Besides, he reiterated that the implementation of rate increase by major central banks for stabilizing inflation risk would likely to trigger an outflow of capital from emerging economies, which dragging down the global economic prospects. As the monetary policy of Japan remained divergence against other central banks, market participants tend to shift their capitals away from Japan markets as well as eyeing on other currencies.

 

EUR/USD

The pair of EUR/USD depreciated last week while closing its market price at 0.9915. The overall trend for the currency pair of EUR/USD was tilted downward as the dollar strengthened amid hawkish stance from the Fed Chairman regarding the rate hike plan in the near-term future. However, the losses of the EURUSD were limited by a series of upbeat data, including German Ifo Business Climate Index and German Manufacturing, where both of the data’s final reading were much higher than the consensus forecast. With such a backdrop, it diminished the investor worries over the recession risk in Europe zone.

 

GBP/USD

The pair of GBP/USD slumped last week while ending session at the price of 1.1620. The currency of Pound continues to be dumped by the investors amid the Bank of England (BoE) warned that the UK economy is likely fall into recession this year, whereby the recession is expected to last for more than a year. With that, the high possibility of prolonged recession risk suppressed the value of the UK currency, while putting the pound’s outlook in a cloudy state. On the other sides, the strengthening of dollar index prompted the investors to buy in the currency, and eventually, caused the currency pair value plunged significantly.

 

Market Review (Commodities): August 22 – 26

GOLD

Gold price hovered below the level of 1770 while closing its market price at $1730 per troy ounce last Friday. Despite the ongoing geopolitical tensions, the gold prices continued being thrown off by the investors as the hawkish stance from Jerome Powell outweigh the market worries over the recession risk. Last Friday, the Federal Reserve Chairman has given his long-awaited speech in the Jackson Hole Symposium event. He commented that the inflationary pressures are far away from the Fed long-term target, hence, another round of big rate hike is still on the table in the next meeting. Besides, as the nuclear talk between the US and Iran close to a deal, market risk-off sentiment diminished, fleeing into other risker financial products.

 

CrudeOIL

Crude oil price surged while ending last week session at the price of $92.85 per barrel. The crude oil prices were lingering between the range of $90 and $95 per barrel as the market sentiment mixed throughout the week. Earlier of the week, as the nuclear talk was getting closer to a deal, whereby the US might remove all the oil export sanction on Iran in the future, the oil prices slumped significantly. On the other side, Saudi Arabia vowed that OPEC+ could further cut the oil production if US were to remove the oil sanctions, as a move to ensure the oil stability. Besides, another member of the OPEC+ United Arab Emirates (UAE) also supported the standpoint that OPEC+ could cut oil production if necessary.

 

Weekly Outlook: August 29 – September 2

For the week ahead, investors would continue to focus on crucial economic data such as the Nonfarm Payroll this week in order to determine further direction. Besides that, the ongoing situation with Ukraine-Russia war will also be in the eyes of investors.

 

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 29 – September 2

Time Market Event Actual Forecast Previous
Monday – 29th August 2022
All Day GBP United Kingdom – Bank Holiday
09:30 AUD Retail Sales (MoM) (Jul) 0.3% 0.2%
Tuesday – 30th August 2022
22:00 USD CB Consumer Confidence (Aug) 97.5 95.7
22:00 USD JOLTs Job Openings (Jul) 11.000M 10.698M
Wednesday – 31th August 2022
09:30 CNY Manufacturing PMI (Aug) 49.2 49.0
15:55 EUR German Unemployment Change (Aug) 27K 48K
17:00 EUR CPI (YoY) (Aug) 9.0% 8.9%
20:15 USD ADP Nonfarm Employment Change (Jun) 200K 128K
20:30 CAD GDP (MoM) (Jun) 0.1% 0.0%
22:30 USD Crude Oil Inventories -0.933M -3.282M
Thursday – 1st September 2022
09:45 CNY Caixin Manufacturing PMI (Aug) 50.2 50.4
15:55 EUR German Manufacturing PMI (Aug) 49.8 49.8
16:30 GBP Manufacturing PMI (Aug) 46.0 46.0
20:30 USD Initial Jobless Claims 249K 243K
22:00 USD ISM Manufacturing PMI (Aug) 52.0 52.8
Friday – 2nd September 2022
20:30 USD Nonfarm Payrolls (Aug) 285K 528K
20:30 USD Unemployment Rate (Aug) 3.5% 3.5%

 

 

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