Fibogroup Market Analysis 2020

[fibogroup.com]

G20: Americans want to put pressure on Saudi Arabia at the summit

USA intends to put pressure on Saudi Arabia on the kingdom’s planned increase in oil production during the G20 summit scheduled on Thursday, which will be held via videoconference. This was reported on Wednesday by the Wall Street Journal, citing sources.

G20 leaders intend to discuss the spread of coronavirus, but USA also plans to raise the theme of the need to end the price war, which adversely affects US companies and banks. In particular, the United States wants to warn Saudi Arabia that the kingdom could also suffer if Western financial systems are destabilized.

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[fibogroup.com]

Even a Saudi-Russia Truce Would Be Too Late to Save OPEC+ Legacy

On Thursday, the States held an urgent teleconference between leaders of the G-10 countries to discuss how to encourage the Saudis to make peace with the Russians.

Even if President Donald Trump could resolve the conflict between the two exporters, the kingdom had already committed to flood the crude oil market next month. And Moscow in every possible way makes it clear that it will not work. The ceasefire would stop a further collapse in prices, but it is too late to save relations between the former partners, who, until this month, together supported the oil market in a state of equilibrium.

Back in 2016, when Saudi Arabia and Russia led the global alliance of oil-producing countries, known as OPEC, the main motive for cooperation was the desire to reduce the oversupply of 300 million barrels of oil in industrialized countries, which prevented price increases.

But now the kingdom is pumping oil at full strength, producing 12 million barrels a day, and demand is falling due to the coronavirus. Goldman Sachs Group Inc estimates that stocks will rise 20 million barrels per day next month.

Even assuming that storage tanks are capable of holding such a volume, everything OPEC+ has achieved in recent years of casualties and reductions will be destroyed in one month.
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[fibogroup.com]

Market Watch

Another 3.3 million unemployed in the USA

A crisis is a time of rapid and fairly strong changes not only in the economy, but also amongst the population as panic sets in. Last week, the main talk was the significant deterioration in the economic situation in Europe, which put pressure on European currencies. Investors also began a massive exodus from all stock markets.
At this point, the US dollar and US government bonds were in great demand, generating a 10 % spike in the US dollar index and causing it to rise to the highest level since 2016. Investor sentiment has changed so far this week causing a pullback in the US currency
The main reason for the weakening of the USD remains investors' expectations of a record package of monetary stimulus from the Fed and the US government, a bearish fundamental factor for the USD and at the same time bullish for the stock market. A big jump in the number of initial applications for unemployment benefits in the United States only increases the likelihood of further stimulation of the economy.
Let me remind you that the number of initial applications for unemployment benefits approached the mark of 3.3 million with an average of about 200 thousand.
I will draw your attention to the EUR / USD currency pair. Buyers managed to overcome the resistance area of 1.1040–1.1065, but by the middle of the European trading session, the pair had adjusted to the psychological mark of 1.1000. This indicates a lack of buyers and for now a pause for any further gains in the dollar
Turning to the current situation in Europe,it is clear that the pessimistic situation in Italy, Spain and France is continuing as they still cannot stop the spread of the virus which may keep the Euro under pressure
I will also point out the GBP / USD currency pair - a breakdown of support at 1.2140 can cause a fairly strong wave of sales, returning the pair to 1.2000. The risk of a bearish scenario developing remains elevated, as there are still no bullish fundamental factors for the GBP, and the recent growth in the currency can be attributed to USD weakness.
I will conclude with a review of the transaction for the sale of the USD / JPY currency pair. After the breakdown of the technical support level at 110.50 the trader opened a full lot sell order. A Take Profit order was placed at the next support level of 109.50. As you can see now, the pair has fallen much further, thereby allowing the trader to earn a little more than $ 900. At the same time, the risk was less than $ 300, since the Stop Loss order was placed 25 points above the transaction opening price.

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[fibogroup.com]

Coronavirus: a huge debt crisis in Europe

In 2012, at the height of Italy's sovereign debt crisis, Mario Draghi saved the euro by saying that the European Central Bank (ECB) would do everything possible to save the euro. Today, when Italy is at the epicenter of the coronavirus pandemic, the strength of the euro will again be tested by the full-blown Italian crisis.
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We can assume that for the sake of the Italian and world economy and despite the high financial costs, Europe will have the political will to do everything possible to save the euro. So we are waiting for the repetition of the scripts.

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[fibogroup.com]

Market Watch

Cheap money


The next financial crisis has already begun and it is still extremely difficult to assess its scale. A number of experts say that the economic consequences associated with this pandemic will be comparable with the consequences of the Second World War. At this stage, I would consider this forecast as pessimistic, although it cannot be ruled out.
Let me remind you that the vast majority of companies are forced to quarantine and, as a result, dismiss or send some employees on unpaid leave. During the first week of quarantine in the USA the number of initial applications for unemployment benefits increased by 3.3 million, while the usual number averages around 200 thousand. Of course, this news put pressure on the USD
Additional pressure on the US currency was exerted by information about the government’s readiness to allocate more than $ 2 trillion of financial assistance for business and the US population. On Friday, March 27, Donald Trump signed the corresponding act for the allocation of the $ 2.2, which caused the USD index to fall back to levels seen in the middle of the month. All these factors and some others have caused the USD to fall by more than 5% in just a few days.
I’ll draw your attention to the GBP / USD currency pair, which has strengthened by almost 9% over the same period. This growth was due not only to a weakening USD, but also a fairly strong strengthening of GBP against most currencies, including JPY and EUR.
Now let's move on to the oil market. The first trading day of the week started with a gap down - the open price of the market was below the closing price on Friday by about $ 1 or 5%. The reason for the latest wave of sales was information that oil companies are running out of storage. At the same time, demand for oil from businesses and an increase in physical demand for raw materials is not expected to pick up in the nearest future so there is a risk of a further decline in black gold prices.
Nevertheless, it is not necessary to believe that the price of American WTI oil will remain at $ 20, As a result, with every dip it may be an opportunity to open a long position at a lower price. At the same time, traders choosing this strategy should take into account the risk of a short-term decline.

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This week, the OPEC+ agreement will cease to exist, while the world continues to fight the coronavirus

Starting April 1, OPEC and its former allies will be free from obligations to reduce oil production. A number of large manufacturers have already announced their intention to increase supplies, but the coronavirus may make adjustments to their plans. Global oil demand is in free fall, and storage will soon be full.
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Weekly Calendar:
03/30/2020, Monday
- Meeting of finance ministers on the use of stabilization measures
03/31/2020, Tuesday
- #PMI manufacturing industries in China
- March EU #inflation
04/01/2020, Wednesday
- The cessation of the existence of OPEC +
- #NonFarmPayroll US labor market preliminary data
- US Crude Oil Reserves
- #unemployment in February, forecast 7,4%
04/02/2020, Thursday
- US #tradebalance
05/03/2020, Friday
- #NonFarmPayroll US labor market data

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China says manufacturing activity expanded in March, defying expectations of a contraction

PMI in China in March (data from the National Bureau of Statistics):
• Industry - 52.0 vs 35.7 in February
• Services sector - 52.3 vs 29.6
• Composite (industry + services) - 53.0 vs 28.9
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On Tuesday China announced that its official Purchasing Manager's Index for March was 52.0, which exceeded expectations for an economy affected by the outbreak of coronavirus. The growth is significant after the disastrous data from February (February PMI of China - 35.7).
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This only means that most companies, indeed, resumed their work. But it is obvious that Chinese business is now facing a serious collapse in external demand due to quarantines in the United States and Europe. Therefore, a return to the normal level of economic activity seems to be very smooth.
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[fibogroup.com]

Fed will launch a new credit line for foreign central banks

The repo mechanism for foreign central banks will be launched on April 6, and its duration will be at least 6 months.

The Fed has already launched a number of programs to provide dollar loans at close to zero interest rates to other central banks for up to 84 days to ensure sufficient dollar liquidity outside the United States.

Earlier this month, the Fed reopened swap lines with five central banks in Canada, Japan and Europe, and began to provide loans of up to $60 billion to regulators in Australia, Brazil, Mexico and six other countries.

Many business transactions in the world are carried out in dollars, while international organizations issue dollar loans. The swap lines were actively used by the Fed in 2008 and 2009.

The Fed’s scale of action surpasses all that the regulator did during the 2008 global financial crisis and the debt crisis in the eurozone 2011-2012, since now dollar financing is available to a much larger number of central banks in developing economies.
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OPEC oil output only rises by 90,000 bpd in March

According to Reuters estimates, OPEC oil production changed slightly in March - an increase of 90 thousand bps.

The main contribution was made by Saudi Arabia (+100 thousand bpd), Iraq (+40 thousand bpd), United Arab Emirates (+60 thousand bpd), Nigeria (+30 thousand bpd), Angola (+20 thousand bpd).
The decline in production continued in Iran (-70 thousand bpd), Libya (-45 thousand bpd), Venezuela (-40 thousand bpd).
As we all recall, the agreement on the limitation of production under the OPEC+ transaction has ceased to be effective from today.
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On the first day of April, when the OPEC+ restrictions ceased to apply, Saudi Arabia began to fulfill the promise to increase oil supplies to the market, however, a number of tankers leave Saudi ports with oil without their final destination (which once again confirms that the oil wars actually occur in verbal form (in the media)).
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PMI: Is business activity growing?

The global PMI, which characterizes the business environment in world industry, rose from 47.1 to 47.6 points in March. Formally, this allows us to speak of a slowdown in the recession, but, in fact, the entire growth of the index was exclusively associated with China, while in all other countries the recession sharply intensified.

US PMI fell to 48.5 in March, compared with 50.7 in February.

UK PMI fell to a three-month low of 47.8, compared with 51.7 in February.

Eurozone PMI fell to 44.5 in March, the lowest in 92 months, from 49.2 in February.

Japan's PMI slowed the fastest after the 2011 tsunami - fell to 44.8 in March, compared with 47.8 in February.
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What we are witnessing is a global industrial recession, and in April its scale is likely to increase amid the introduction of quarantines in a wide range of countries.
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