Fibogroup Market Analysis 2020

[fibogroup.com]

Economic calendar for the week

Slowly but surely, business activity indicators in the world are growing. #Covid19 pandemic has long reached a plateau and is in decline. The OPEC+ ministers are discussing the possibility of holding negotiations scheduled for June 9-10, 2020 almost a week earlier on June 4.
And yet, there are political factors that could trigger a new wave of dollar appreciation:
On Friday, May 29, US President Donald Trump announced a series of sanctions against China; Mass riots across America will force investors to temporarily go cache. This week's drivers may not work due to a more powerful impulse from America. Nonetheless:
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Weekly calendar:
06/01/2020, Monday
- Updated PMI in the USA for May;
- Updated PMI in the UK for May;
- Updated PMI in the EU for May.
06/02/2020, Tuesday
- Reserve Bank of Australia Rate (RBA).
06/03/2020, Wednesday
- Bank of Canada rate;
- US Crude Oil Reserves.
06/04/2020, Thursday
- ECB rates, forecast - unchanged; Lagarde press conference.
06/05/2020, Friday
- #NonFarmPayroll US Labor Market Data Block for May;
- Canada #unemployment in May.
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Gold rises as US riots grow

The gold price is rallying for a third straight day in today’s trading session on the back of US dollar weakness as well riots in major U.S. cities caused by the death of an unarmed black man spiraled out of control which left investors heading for the precious metal as a safe haven asset.

Read the full version:

Gold rises as US riots grow, Analyst Andrew Masters

The gold price is rallying for a third straight day in today’s trading session on the back of US dollar weakness as well riots in major U.S. cities caused by the death of an unarmed black man spiraled out of control…

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[fibogroup.com]

Market Watch
China is ready for tough countermeasures

Let's start today's issue with the conflict between the US and China. I will your draw attention to the fact that China is still trying to restore the fragile peace agreement. The Chinese Ministry of Foreign Affairs calls on the United States to rectify its mistakes and stop heading in the wrong direction or otherwise China will make moves protect its own interests as well as security.

To confirm China is serious with its intentions, Bloomberg published a report informing that the Chinese government ordered large state agricultural firms to suspend purchases of some US agricultural products from the United States. As a result, the US dollar came under intense selling pressure. In early trading in Asia, we observed a significant strengthening of the AUD/USD currency pair, which continued into the first half of the European session and amounted to almost 2%. Which means at this time that active market purchases are no longer appropriate.

Now let's move on to the oil market, which continues to recover amid optimism regarding the upcoming OPEC + meeting, which will be announced today. Currently the demand for oil of the American grade WTI remains moderate. The Bulls are failing to break above $ 36 per barrel. As a result, the risk of corrective decline remains elevated.

I will also draw your attention to the fact that during the European trading session there will be no important macroeconomic publications. In any case trading activity remains quite high. Given all this, there is a risk of a surge in volatility during the opening of markets in the United States. Any US response to China, as well as certain news releases can have a strong impact on the US currency.

It is also necessary to consider the risks for the US stock market. The main indices began to adjust during the premarket, so I do not exclude an increase in selling activity when the market opens. Pressure is exerted not only by the conflict between the USA and China, but also by internal conflicts and unrest in the country. Therefore, the volatility of trading during the American session may increase significantly.

That’s all from me. It would be wise to closely monitor the latest news and be prepared for any surprises in the market.
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#MarketWatch

 

[fibogroup.com]

American chaos and weak PMI

Riots intensify in the US. Clashes between protesters and police continued in the country's largest cities from New York to Los Angeles, forcing Amazon.com Inc. restrict delivery and Apple Inc. to close some stores.

Refined business activity index (PMI) of manufacturing industries:
- In China a decline to 50.6 is shown, although forecasts spoke of growth.
- Europe is definitely slowly recovering: PMI of manufacturing in the entire Eurozone has grown to 39.4 from 33.4.
- In the UK, business activity is recovering a little faster than in Europe (up to 40.7 from 32.6).

We believe that the recovery of the Chinese economy will continue, but friction with the United States increases uncertainty. The strongest data seems to come from the UK. This is an occasion worthy of growth for #GBPUSD this week.
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Brexit talks today to create movement in the pound

The British Pound has managed a blistering start to the trading week against the Euro and U.S. Dollar, as the financial markets celebrate the reopening of businesses around the world which is boosting investor sediment but much of the sterling gains may come unstuck as the EU and UK prepare for today’s crucial Brexit trade negotiations.

Read the full version:

Brexit talks today to create movement in the pound, Analyst Andrew Masters

The British Pound has managed a blistering start to the trading week against the Euro and U.S. Dollar, as the financial markets celebrate the reopening of businessesaround the world which is boosting investor sediment…

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U.S. riots: curfews and troops imposed in 40 US cities

- US authorities impose curfews in major cities due to riots that began with protests against the killing of an African American by police in Minneapolis, and ended with looting and vandalism from Seattle to New York.
- US authorities are ready to use the armed forces to restore order in the country, said President Donald Trump. Trump tells 'weak' governors to 'dominate' streets amid protests.
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Due to the fact that the protests are predominantly in densely populated cities, it is more likely that this will not have any strong impact on the economy. However, a slight local strengthening of the US dollar is possible against the background of profit taking by large funds.
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RBA leaves rates unchanged

The Bank of Australia decided to leave the official cash rate unchanged at a record low of 0.25%.
The RBA has already lowered it from 0.75% at two meetings in March, including one emergency meeting amid widespread social distance measures.
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Recent data from the labour market served as a good reason for yesterday's decision. After a devastating result in April, when nearly 600,000 people lost their jobs, the unemployment rate rose to 6.2%, which is far from the RBA target level.
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Marketwatch

The latest report on changes in the level of business activity in the services sector in China significantly exceeded analysts’ expectations, which provided additional support to commodity currencies.

I’ll draw your attention to the AUD/USD currency pair, which has come close to the technical resistance area of 0.7000–0.7070. Despite rising 240 points without any significant corrections, again today the pair managed to gain another 100 points. As a result, this marks three straight days of abnormal growth and therefore, the risk of corrective decline remains increased.

A Strengthening AUD indicates an increased tolerance for risk, which is also confirmed by the collapse of JPY paired with most currencies. Despite the general weakening of the USD, which also serves as a safe haven currency, the USD/JPY currency pair has strengthened by more than 120 points in just one trading day - this is the maximum intraday volatility since May 11 of this year.

And now let's move on to the latest release on changes in the unemployment figures from Germany. Despite coming in higher than analysts’ expectations, selling activity of the EUR/USD currency pair remains moderate indicating that the disappointing data from the labor market in Germany is not major news or critical for EUR.

Moving to the American trading session, I will note the upcoming announcement of the latest interest rate decision from the Bank of Canada. The probability of a reduction in rates is extremely low, so it is better to focus on the monetary statement surrounding this decision. Optimistic comments from the Central Bank may provide additional support for CAD, which is already strengthening against the backdrop of rising oil prices.

And I will complete today's review with news on the protests in the United States, which has already brought thousands of protesters to the streets. The protests have turned violent and are and are accompanied by massive robberies and vandalism which is bad news for the US dollar. Further aggravation of the situation will contribute to a further weakening of the USD in the short term.

That’s all for me. Closely monitor the news background and be prepared for all the surprises of the market.
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Russia and Saudi Arabia extend oil agreement

Russia and Saudi Arabia agreed on the need to extend the maximum level of reduction in oil production at OPEC+ by at least one month. Future plans will depend on the market situation.
And the situation is not so good.

The OPEC+ negotiations scheduled for June 4 are postponed due to Iraq and Nigeria's failure to comply with their quotas. Iraqi temporary oil minister Ali Allawi referred to "technical problems", so his country was not able to reduce production to an agreed limit. As a result, due to saboteurs the meeting on June 4 will not take place. Only the technical committee will work. Together with the cancellation of the meeting, the opportunity to formulate delivery schedules and prices for July are postponed. Uncertainty in the oil market will continue until June 9-10 along with a possible local correction in quotes.

Lower oil prices will provoke a local weakening of CAD, NZD, AUD and the strengthening of the US dollar. In major currency pairs, this will result in a possible correction.
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Bank of Canada: believing in a brighter future

At the last meeting, the Bank of Canada left the interest rate unchanged. Steven Poloz, whose term of office ended at midnight on June 2, and Tiff Macklem, his successor, issued a joint interest rate statement on June 3, expressing confidence that the worst of the crisis has ended.
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"As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment".

"The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target".
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