Fibogroup Market Analysis 2020

[fibogroup.com]

Oil: Saudi Arabia sharply reduced exports

Saudi Arabia continues to push global oil prices upward, cutting production and exports to a minimum of almost 20 years. Saudi Aramco announced a sharp drop in shipments in June. Buyers will receive 10-30% less oil than ordered.
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The current situation reflects that market sentiment has changed again, only now everyone has switched from the "panic sale" mode to the "panic shopping" mode. Saudis from market destroyers became market makers again, setting an example for others and sending positive signals to the market.
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[fibogroup.com]

Market Watch
Oil continues to grow

In most cases, the first trading day of the week contains the least amount of important macroeconomic reports, which means trading activity in most currency pairs can remain low to moderate.

I’ll draw your attention to the report on GDP figures from in Japan for the first quarter of this year. The data came in above analysts’ expectations, which is a bullish signal for the stock market, but bearish for JPY, since any improvement in the economic situation reduces interest in safe haven assets such as the yen.

Nevertheless, buying activity in the USD/JPY currency pair remains restrained, although the bullish scenario remains a intact until the quotes return below 106.70 - the nearest strong technical support level.

And now let's move on to the trouble brewing between the USA and China, which is generating a demand for safe haven assets. Let me remind you that from last Friday, the ban on the purchase of chips made by Huawei came into force - this is the next stage of the trade war between the world’s 2 largest economies which has increased the demand for gold.

Today, gold is trading above $1,770 an ounce, which is still below the yearly highs. Any further deterioration in trade relations between the US and China will contribute to a slowdown in global economic growth and, as a result, an increase in demand for gold. The next target for buyers remains $1800 per ounce.

I will also draw your attention to the growth in the oil price and the new highs since mid-March. The price has managed to overcome the previous high at $30.55 per barrel and now there is a chance of further growth to the $35 a barrel mark.

Despite the steady increase in oil prices, demand for the Canadian dollar remains restrained. Thus, the USD/CAD currency pair is still holding above previous lows and the psychological support level of 1.4000. Nevertheless, the risk of further selling pressure continues to increase. The main bullish driver for CAD is rising oil prices. Therefore, any further growth in the “black gold” can provoke a strong selloff for this currency pair.

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

The world is gradually moving out of quarantine: the “social distance” measures in Hong Kong are about to expire, the Indian authorities are preparing to announce new concessions in isolation, and Japan may cancel the emergency regime in megacities. Meanwhile, the chairman of the Federal Reserve will report to Congress on the implementation of financial assistance programs under the CARES law, which was adopted in response to the Covid-19 pandemic.
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Weekly calendar:
05/18/2020, Monday
- GDP for the 1st quarter of 2020;
- Non-working day in Canada.
05/19/2020, Tuesday
- Fed Chairman Jerome Powell will speak to the US Senate;
- UK #unemployment in April.
05/20/2020, Wednesday
- UK #inflation. Consumer Price Index (CPI) for April;
- EU #inflation. Consumer Price Index (CPI) for April;
- Canada #inflation. Consumer Price Index (CPI) for April;
- Protocol of the April meeting of the Fed;
- US crude oil reserves.
05/21/2020, Thursday
- PMI Manufacturing in the USA for May;
- PMI manufacturing in England in May.
05/22/2020, Friday
- PMI manufacturing in Germany in May.
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[fibogroup.com]

Japan officially entered recession

First quarter GDP data released on Monday underscored the expanding impact of the outbreak, with exports falling 6% - the most since the devastating earthquake in March 2011:
Japan's economy in the 1st quarter declined by 0.9%; in relation to the 1st quarter of last year, the decline in GDP amounted to 2.2%. Such numbers are not news, because already in the 4th quarter of 2020, Japan's GDP was already in the red (-1.9% q/q) due to higher taxes, and even then it was clear that against the background of coronavirus, the third world economy would survive a recession.
We believe that the decline will continue in the 2nd quarter, which was subject to the most stringent quarantine restrictions.
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[fibogroup.com]

UK unemployment has skyrocketed

Unemployment in the UK in January-March 2020 unexpectedly amounted to 3.9%. Statistics for the first three months of the year do not take into account the impact of the coronavirus pandemic. it should be borne in mind that the first month in which the restrictions were in effect for 30 days was April, and it is not included in the calculation of the data provided.
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Recall, it was previously reported that the Central Bank of England predicts the largest economic slowdown for the first time in more than 300 years. According to forecasts of the Bank of England, the British economy will shrink by 25% in three months, and unemployment will reach more than 9%. We believe that this negative scenario will only partially be fulfilled, which will put moderate pressure on the #GBPUSD currency pair in the second quarter.
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[Glastonburyk]

Right now I’m discounting most fundamentals as it’s all bad, relying on tech and sentiment mainly

 

[fibogroup.com]

Market Watch
"Minutes" from the US Federal Reserve

Today’s release will begin with the rapidly deteriorating situation in US-China relations. Let me remind you that Donald Trump congratulated the President of Taiwan on his victory for a second term. China took this acknowledgement as an interference in their "internal affairs", which violates the policy of a single China.

In response to this move by the American president, China promises to retaliate, which will contribute to a further deterioration in relations, which is negative for the global economy and will further increase the demand for safe haven assets.

Moving to the European trading session, I will draw your attention to the release of weaker than expected inflation data from the UK which came in lower than an already pessimistic forecast. As a result, the GBP has fallen sharply, and the GBP/USD currency pair has dropped to the technical support level of 1.2220.

The future direction of the price movement will depend on the report from the Bank of England on monetary policy. Any hints the bank is prepared to cut interest rates may lead to a further selloff in the GBP. Only unexpected optimism from the Central bank head may support the pound.

During the US trading session, a report on changes in US oil reserves will be published. A further reduction should be good news for the black gold market.

Trading volatility in this market has fallen dramatically in the last few days and this may change with a surge occurring today. Unexpected growth in oil reserves may see American grade WTI fall to $30 per barrel.

I also note the upcoming publication of the minutes meeting of the US Federal Reserve. The so-called "minutes" usually increases trading activity in the US dollar. Any mention of a cut in Interest rates may see the US dollar come under pressure.

I will complete today's review with an analysis of the transaction for the purchase of the GBP/USD currency pair for one lot. The deal was opened at 1.2120, and a Stop Loss placed at 1.2090, and a Take Profit at the next strong resistance level of 1.2230, which now serves as a support. Profit on this transaction amounted to $1,100.

The above review is not a direct guide to trading, and can only be classed as a recommendation.
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#MarketWatch

 

[fibogroup.com]

Germany and France set up €500 billion support fund

The euro rose on Wednesday after receiving support from the Franco-German proposal to create a common fund to support the economy of €500 billion for the EU countries most affected by the COVID-19 pandemic. And this is not credit money. Assistance will be allocated in the form of prizes and grants (which is absolutely free!). The first applicants for help will be Italy and Spain, who have suffered more from the coronavirus pandemic.
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Someday, such a clumsy way to support the economies of certain regions will have repercussions, but not in the next business cycle. So the Euro will continue to grow against the US dollar throughout the current year.
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[fibogroup.com]

Oil at 10 weeks peak

Oil is trading at a 10-week high after the publication of data on a decrease in US stocks of crude. Also, oil quotes are growing on reduction of concerns about overflowing storages and easing restrictions associated with the coronavirus pandemic. Since the beginning of May, when the transaction on limiting production in the OPEC+ format came into force, prices rose by more than a third.
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On Wednesday, May 20, when the June futures contract for WTI was expired, we expected a repeat of the April situation when the price went negative and reached almost minus $40 per barrel. However, this did not happen, which also gave a positive signal to the market.
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[fibogroup.com]

PMI: The economic decline slowed down in May

Preliminary PMI indices for May published today indicate a slowdown in the economies of Japan, Australia, the Eurozone and the UK (US data will be published in the second half of the day).
The indices showed a friendly growth since April historical lows, but at the same time they are still at levels corresponding to a deep recession.
Since the process of quarantine removal is smooth and limited, and consumer activity remains suppressed, it is unlikely that economies will return to growth earlier than the 3rd quarter.
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