Fibogroup Market Analysis 2020

[fibogroup.com]

Dollar’s long-term prospects turn gloomy

In March, the world reserve currency rushed up and reached multi-year highs even despite the collapse of stock markets and bonds close to disaster. A month has passed, the dollar is still strong and enjoys the status of a safe asset.

But some analysts and investors are sure that the trend will change soon due to the policies of the world central banks aimed at increasing dollar flows in the financial system. In addition, the US Federal Reserve lowered rates much lower than other central banks in large economies. This will also increase pressure on the dollar, experts are sure.

In the near future, the dollar is unlikely to become much cheaper, partly due to nervousness and uncertainty in the markets. Goldman Sachs analysts said they expect the dollar to rise against the euro in the short term. But the Fed’s aggressive reaction to the crisis could lead to a weakening of the US currency by the end of the year, said Mark McCormick, head of currency strategy at TD Securities.
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Market Watch
Doomsday in the oil market

This week has already gone down in history as the price of the May futures contract for US WTI oil fell below zero. The historical low was fixed below -$40 a barrel. Today, the June futures are trading at a record low of $6.5 per barrel.

The current situation can be explained by a huge oversupply supply and news that the largest oil storage facilities in the USA were almost full. Let me remind you that on Tuesday in an interview with Bloomberg, the financial director of the Rotterdam Royal Vopak NV, the world's largest independent oil storage operator, said that they had almost no free space for oil storage. Of course, other operators have a similar situation, which contributes to lower oil prices.

Against this background, we are witnessing a fairly strong weakening of commodity currencies, in particular the CAD. Thus, the USD/CAD currency pair, having strengthened by more than 250 points, reached the level of 1.4260. I would like to draw your attention to the fact that this growth was due to a weakening CAD, as the US dollar index remained basically unchanged.

Despite the issues in the oil market, which could lead to a series of bankruptcies in the oil and gas sector of the USA, Canada and a number of other countries, the demand for safe haven assets remains moderate such as gold where the price remains stable and we are seeing moderate growth after a pretty long decline. Also, the JPY remains quiet, which could indicate an increase in interest in safe haven assets or an escape from risk.

With all this yesterday, the Bank of America published an unexpectedly optimistic forecast for gold prices. The target for the next 18 months has been revised from $2,000 to $3,000, while the forecast for the average price for 2020 is close to current values - $1,695 and $2,063 in 2021. A prerequisite for the development of this scenario is the depreciation of currencies amid increasing risks for the largest central banks in the world. This forecast from Bank of America analysts can be interpreted as an extremely pessimistic forecast for the further development of the global financial crisis.

The above review is not a direct guide to trading, and can only be classed as recommendations.
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Australia's retail surge

The surge in toilet paper sales has led to a sharp surge in retail sales in Australia as a whole, with a record high. The growth rate in March accelerated to 8.2% compared with the previous month, according to preliminary data from the Australian Bureau of Statistics (ABS).

The growth rate in March was a record, which is explained by the rush demand for food and essential goods in isolation.

Although there is some concern that this indicator does not reflect the whole picture, the market perceives it as a signal for economic recovery. Recommendation - buy the #AUDUSD currency pair.
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[fibogroup.com]

USA: oil stocks up 15 million barrels per week

Commercial oil reserves in the US over the past week increased by 15.022 million barrels and amounted to 518.64 million barrels on April 17, according to the US Department of Energy.
- Moreover - tankers gathered off the coast of California. The volume of oil stored in tankers reached 20 million barrels. They have nowhere to go due to falling demand for raw materials.
- Gas prices in Europe continue to fall, updating the lows every day.
- Due to low oil prices, shale oil production in the USA by the end of the year will decrease to 10.1 million from 12.8 million bps at the beginning of the year, and in 2021-2022. reduced to 8.5 million b/s.
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[fibogroup.com]

UK PMI: sterling strengthens despite terrible data

The pound strengthened on Thursday, even after preliminary UK PMI indices for April fell well below even the most pessimistic forecasts, as market activity does not seem to depend on new data on the catastrophic economic consequences of the spread of coronavirus.

The PMI fell to a new all-time low of 12.9 from 36.0 in March. The magnitude of the collapse almost guarantees a huge recession in the fifth largest economy in the world and will add doubts that financial assistance from the government will quickly get to business.
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The survey doesn't really tell us anything more than what we already know from what we see from our windows today.
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[fibogroup.com]

Bank of Japan weighs unlimited government bond buying

Next week the Bank of Japan will discuss the transition to unlimited purchases of Japanese government bonds in response to the deep economic downturn caused by the coronavirus.

The Central Bank of Japan is currently aiming to increase its government bonds by approximately 80 trillion yen ($742 billion) per year. The transition to unlimited purchases puts the Bank of Japan on a par with the US Federal Reserve in terms of growth in government debt.

This decision led to a sharp surge in #USDJPY #EURJPY. In the future, this factor will contribute to smoothing and normalizing the dynamics of the national currency of the country of the rising sun.
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[fibogroup.com]

Market Watch
Record decline in business activity

The economic situation in the EU is rapidly deteriorating, significantly exceeding analysts forecasts. A report published on Thursday on a change in the level of business activity in Italy, France, Germany and Britain showed an unexpectedly strong deterioration in the situation. As a result, the risk of weakening EUR and GBP continues to increase.

So, with the opening of the European trading session, we are witnessing a weakening of the EUR/USD currency pair. Until the return of quotes above 1.0775, there is a risk of a further decline to 1.0650. The closest technical support level remains at 1.0720.

A similar situation with the GBP/USD currency pair - the lack of demand above 1.2370 led to the appearance of another round of selling. For a more powerful decline, an additional bearish fundamental factor for GBP or a very strong bullish factor for USD is needed. Let me remind you that today there is a lack of news to hit the market, therefore, trading activity may remain within a range.

Now let's move on to the oil market. After a record collapse at the beginning of this week, the bulls managed to regain some of their previously lost positions. At the same time, demand at the level of $ 18 per barrel remains very weak, since in the United States there is practically no room for storage of oil. All this led to a collapse. As a result, only a significant decrease in the production of "black gold" in the US can stabilize the market in the coming days or weeks.

The recovery in oil prices puts pressure on the USD/CAD pair, but sellers' activity remains weak including against the backdrop of a strengthening USD. Prior to the breakthrough of the technical support area 1.3990–1.4000, there is a risk of renewed growth to 1.4255. As a result, at the moment, selling pressure remain in the zone of increased risk.

We conclude today's review with an analysis of a deal to buy gold. After the breakdown and fixing the price above the technical resistance level of $1715, the trader placed a pending buy order at the level of $1715.0 with a volume of 1 lot. A Take Profit order was placed at the next resistance level - $1735. As you can see now, the price of gold has reached $1,760, which generated a profit of $2,000.

The above review is not a direct guide to trading, and can only be classed as a recommendation.
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PMI Indexes: April is the second month of a disaster

April PMI preliminary indexes released yesterday paint a picture of total disaster.
Life in the services sector in all major economies (preliminary PMIs are not published in China) practically stopped in April, especially in the Eurozone (forecasts for European countries are now the most dramatic in comparison with others).
However, in the USA these are record-low values in the entire history of polls.
In the industrial sector there is a recession, but here the depth of the recession is still less.
All hopes are that in May countries will slowly begin to ease quarantine restrictions. Fitch estimates that every month quarantine costs the global economy 2% of GDP.
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Market Watch
Pending interest rate cuts

In most countries, they continue to discuss steps to phase out quarantine, while at the same time talking about the difficulties for the rapid recovery of the global economy. So, during today's speech, the head of the Bank of Japan announced that the monetary policy will be adaptive and, as a result, the regulator can quickly and without hesitation implement easing policies. In this case, we are talking about the fact that the interest rates of the Bank of Japan may decrease as the rapidly increasing volumes of bond purchases.

The expansion of the quantitative easing policy in the form of active bond repurchases supports Japanese stock indices. At the same time, JPY's trading activity remains moderate, once again indicating a clear market uncertainty.

Goldman Sachs analysts say there is the prospect of a further reduction in the Fed's main interest rate. According to their forecast, in June we will see a decrease of 0.5%. Let me remind you that this week the Fed will hold a meeting on interest rates and monetary policy in general. As a result, the appearance of any information about the regulator’s readiness to make changes to the current policy will be accompanied by a surge in US dollar trading activity.

I will draw your attention to the moderate volatility for trading in the US dollar paired with most currencies. In addition, with the opening of the American trading session, the situation is unlikely to change very much due to the lack of news to hit the market. Also, on Tuesday, the economic calendar will be virtually empty. Only a report on changes in consumer confidence in the United States will be able to influence investor sentiment - the forecast is pessimistic.

Now let's move on to the oil market. After an abnormal collapse last week, all traders and investors are closely watching the oil price. During the Asian trading session, the price of oil declined markedly. But by the opening of markets in the United States, the situation had stabilized somewhat. Nevertheless, there is still no reason for obvious optimism, as a result, active purchases remain a substantial risk.

The nearest strong technical level of support remains around the mark of $15 per barrel of US-grade WTI oil.

The above review is not a direct guide to trading, and can only be classed as a recommendation.
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[fibogroup.com]

Economic calendar for the week

Marathon for meetings of the leading Central Banks of the World: Large central banks generous with incentives will again think about how to support the economy in the context of the coronavirus pandemic. OPEC+ countries will begin to reduce oil production on May 1 - a day off for many countries of the world.
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Weekly calendar:
04/27/2020, Monday
- Bank of Japan rate; Haruhiko Kuroda's press conference.
04/29/2020, Wednesday
- Fed rate, forecast - unchanged; Powell's press conference;
- US GDP for the first quarter, forecast -3.9% q/q.
04/30/2020, Thursday
- ECB rates, forecast - unchanged; Lagarde's press conference;
- Eurozone GDP for the first quarter.
05/01/2020, Friday
- Most European countries, Russia, a number of Asian and Latin American countries celebrate Labour Day.
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