Fibogroup Market Analysis 2020

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Trump accused China of "massacres around the world"

The United States continues to tighten the rhetoric nuts against China.
On Wednesday, US President Donald Trump, accused Beijing of "massacre":
“Someone crazy in China has just issued a statement blaming everyone except China for the virus that killed hundreds of thousands of people. Please explain to this dunce that only the incompetence of China, and nothing more, has caused the massacre of people on a global scale, ” Trump wrote on twitter.
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Trump's remarks are nothing but a political move ahead of the election. The classic political play is to divert the anger of the masses from itself and direct it towards a new common enemy, whom he will defeat right a week before the election (having driven into a white house on a white horse and the imprint of light fatigue in the process of seizing the evil hydra).
That is why you should not take these statements as drivers for the stock and foreign exchange markets.
However, there are still drivers here, but they are in a slightly different plane:
The US Senate passed a law on the delisting of shares of Chinese companies on US exchanges. Currently, securities of more than 150 Chinese companies with a total value of more than $1.2 trillion are traded on United States exchanges. Their possible delisting will be a sensitive blow for China.
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Market Watch
May is even worse than April


I'll start with the bad news - Incoming statistics for May shows the situation has deteriorated in comparison with April. Let me remind you that in May several European countries began to mitigate quarantine measures, and in Italy a large number of small shops reopened. Nevertheless, the incoming statistics indicate a further decline in business activity in the services and manufacturing sectors across Europe.

The business activity indices published on Thursday for the currency block and Britain came in below 50 points, indicating that in May the level of business activity was below the level in April. All European countries showed less growth in May compared to April which means the outlook for European currencies is pessimistic.

Let’s take a look at the GBP/USD currency pair, which continues to lose ground, on the back of declining retail sales and an increase in borrowed funds from the government. As a result, the risk of the currency pair returning to the psychological mark of 1.2100 continues to increase.

Now let's move on to the oil market. The collapse in oil prices is due to some changes in policies from China, which could lead to a significant decrease in oil demand. Nevertheless, don’t count on further weakness as shale oil production in the USA continues to decline. In addition, participants in the OPEC + transaction, which entered into force on May 1, continue to fulfill their obligations and this will contribute to a moderate increase in oil prices.
Due to the lack of statistics during the American trading session, trader’s attention will focus on incoming information about the conflict between the United States and China. An escalation of the conflict will contribute to higher gold prices.

I will complete the review with a deal to buy a USD/CAD currency pair. A long position was opened at the price of 1.3940 by two lots. A take Profit order is set at the next technical resistance level of 1.4020. At the time of writing the review, quotes of the pair reached the marked resistance level. Profit on this transaction amounted to $1,140.

The above review is not a direct guide to trading, and can only be classed as a recommendation.
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Coronavirus "infected" Brexit

The coronavirus pandemic calls into question the implementation of the plan to complete the exit of the UK. Of course, even in “precovid19” times, no one expected that in 11 months (counting from January 31), it would be possible to agree without problems on the future of trade relations between Britain and the EU - taking into account how the negotiations went on all these years ... the coronavirus pandemic in the economy and health care system makes even more doubt that Brexit will be able to be completed according to the plan without causing even more damage to the already badly worn economy.
Mass quarantine will give an occasion to both sides of the conflict to continue pulling the already stretched strap in the middle of 2021.
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Bank of Tokyo-Mitsubishi UFJ recommended selling the pound and buying the yen

Japanese retail investors have formed a large long position in the pound. Speculation on negative rates could undermine the British currency.

Currency strategists at the Bank of Tokyo-Mitsubishi UFJ forecast a stronger yen against the pound, as talk of negative rates in the UK encourages traders to sell British currency.

Retail investors from Japan could trigger sales because they have accumulated a significant amount of long positions in the pound, said Derek Halpeni, head of market research at MUFG.

Reduced profitability in foreign markets is a key factor in supporting the yen, pricing will more confidently begin to lay rates in the UK in the foreseeable future below zero, this will strengthen the tendency to buy yen.

Bank experts recommended selling the pound against the yen at 131.25 with a target of 126.60 and a stop order to buy at 134.10.

The yen has weakened in recent weeks, but MUFG experts are still confident in the potential of its strengthening.
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Negative rates to weigh on pound

The Bank of England made history last week by issuing a round of negative-yield bonds which basically means that participants in the market are paying the Government to lend them money and although this may seem ludicrous, for many it is one of the safest bets at the moment with regards to investing, considering the current situation with the UK economy.


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Market Watch
New sanctions and rising oil prices


Tensions between the US and China are growing. On Friday, the US Department of Commerce announced the blacklisting of 33 Chinese companies and government organizations, thereby putting additional pressure on the Chinese economy. In addition, the media reported that the White House administration of Donald Trump contemplated testing nuclear weapons which has not been confirmed. It is a known fact that China and Russia are already testing nuclear weapons.

Despite all this, the demand for Safe haven assets remains virtually unchanged. Gold prices remain subdued and safe haven currencies such as the JPY and CHF remain stable. This may be due to long weekends in the USA and Britain so on Tuesday there may be a surge in trading activity.

And now let's move on to the published report for changes in the business environment, as well as assessing the current situation and economic expectations from Germany. The data came in mixed and the current economic situation turned out to be worse than analysts’ expectations.

As a result, the activity of EUR buyers remains restrained. At the same time, a marked improvement in economic expectations eased the pressure on the EUR/USD currency pair. Despite this buying activity for this currency pair remains in the risk zone, until the pair returns above the technical resistance level of 1.0910.

Now let's move on to the black gold market. After a short-term, but rather deep correction, the oil price has bounced back. There are two reasons to be optimistic, and we have already discussed them several times. The first is the reduction of quarantine restriction measures, which leads to an increase in demand for oil and oil products and caused a decrease in US oil reserves.

The second, but just as important factor is the OPEC+ agreement for a cut in production. As a result, we are seeing a moderate increase in oil prices. To break through the strong technical area of resistance of $35–$36 per barrel, an additional and sufficiently strong bullish fundamental factor is needed such as an easing of lockdown measures in the USA regarding the coronavirus which will increase demand as the US is the world’s biggest consumer of oil.

The above review is not a direct guide to trading, and can only be classed as a recommendation.
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Economic calendar for the week

Trump accuses China of all mortal sins. The world continues to drop quarantine bonds, and in Japan the emergency mode is being canceled and the liquidity gun is being charged.
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Weekly calendar:
05/25/2020, Monday
- Non-working day in the USA;
- Non-working day in the UK.
05/27/2020, Wednesday
- The European Commission will publish a proposal for an anti-crisis fund for 500 billion euros;
- Speech by ECB Chairman Christine Lagarde.
05/28/2020, Thursday
- US #GDP for the first quarter;
- US crude oil reserves.
05/29/2020, Friday
- European Union #inflation. Consumer Price Index (CPI) for May.
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Global oil demand has yet to peak, says IEA head

During the press conference, the head of the International Energy Agency (IEA) gave a very encouraging comment on the recovery of the oil market:
- “Low oil prices and a gradual economic recovery will lead to the fact that the demand for oil will not only return to the pre-crisis level, but also exceed it.”
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The global level of oil demand has not yet reached a peak, and we see that prices are steadily rising. On the one hand, Saudi Arabia stimulates this process, on the other hand, a wave of bankruptcies of companies producing shale oil has begun in the USA:
- The Financial Times reported that 17 shale oil companies have already begun bankruptcy proceedings this year.
- According to Baker Hughes Co, more than two-thirds of the total number of oil rigs in the United States has been stopped since mid-March. The number of operating towers has fallen to its lowest level since July 2009. All this only confirms that production in the USA will soon fall, even if companies re-launch existing wells earlier than expected.
- According to the Commodity Futures Trading Commission (CFTC), speculators have increased the volume of net long positions on WTI American light oil for the week ending May 19.
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Is the gold price being manipulated?

The lack of volatility or growth in the gold price recently has left many in the market scratching their heads as to why the precious metal hasn’t rallied considering the current coronavirus epidemic which has caused significant damage to the world economy which should have seen gold sought out as a safe haven.


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EU Antivirus Fund

The path to the euro's recovery is likely to be bumpy. Four European Union countries already nicknamed the "mean four" in the media are to blame. They categorically refused to support the plan of Berlin and Paris to create a fund to help countries that were most affected by the coronavirus.
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Austria, the Netherlands, Denmark and Sweden decided to openly confront the difficult times of the pandemic because for the generosity of France and the Federal Republic of Germany they will have to pay first of all. However, in the current situation, the regulator (ECB) has no particular choice. And an antivirus fund will be established soon.
We believe that it's institution will give rise to signs of a recovery in the global and European economies, which in the end will create an opportunity for levels of the #EURUSD pair above 1.10.
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To preserve the chances of survival, Europe must prove that it is solidary and capable. On Wednesday, various options for supporting the economy will be considered. So tomorrow is a responsible trading day in all currencies associated with the Euro.
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