Fibogroup Market Analysis 2020

[fibogroup.com]

US Unemployment: new records

For the week, 6.648 million people applied for unemployment benefits in the United States - 30 times more than in ordinary weeks. A week earlier - 3.283 million.
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Ministry of Labor data provide insights into the severity of the economic crisis caused by the coronavirus pandemic. The COVID-19 outbreak led to the freezing of a large part of the economy in the United States and in dozens of other countries of the world.
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[fibogroup.com]

Global cost of coronavirus may reach $4.1 trillion

The cost of damage caused by the coronavirus pandemic can reach $4.1 trillion, or almost 5% of the global gross domestic product, depending on the spread of the disease in Europe, the United States and other large economies, the Asian Development Bank said.

A shorter containment period could limit the damage to $2 trillion, or 2.3% of world production. Developing countries in the Asian region, including China, will account for 36% of the total cost of the pandemic.

Meanwhile, on March 6, ADB believed that a virus outbreak would cost the world economy $347 billion, and growth rates would decline by as much as 0.4%. Since then, the epicenter of the epidemic has shifted from China to Europe and the United States, with the number of reported cases currently exceeding 1 million.

ADB lowered its growth forecast for Asia in 2020 from 5.5% to 2.2% last September. The forecast for China has been reduced from 6% to 2.3%. For comparison: last year, the country's economy grew by 6.1%. According to the report, this year there will be weak growth in all sub-regions of developing countries in Asia.

Countries dependent on tourism and raw materials, including Thailand, will suffer the most from the pandemic. If the epidemic can be stopped within three to six months, the economy will recover faster.

Inflation is likely to accelerate due to rising food prices, even despite declining economic activity; but low commodity prices will help smooth out price hikes, the ADB report said.
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[fibogroup.com]

Market Watch

Incredible rally in the oil market

We conclude the week with the issues surrounding financial markets which of course is a, lack of liquidity and, as a result, panic.
I will begin today's review with an event that occurred on Wednesday, April 1. Just before the opening of the American trading session which is also the end of the trading session in London, we observed incredibly strong growth of the AUD throughout the market. It is worth noting that the growth of the AUD/USD pair, which exceeded 130 points, lasted only 5 minutes, and over the next 5 minutes, the currency was sold off and more than half of the gains were lost.

Given the nature of the price movement, I can assume that the reason is the lack of liquidity at the time of opening of one trading session while the other session was closing
Another strange factor this week was the sudden rise in oil prices. We are talking about a record daily growth in the price of American WTI grade oil, which exceeded 30%. At the same time, a significant part of the upward movement occurred in less than an hour and exceeded $ 5. In this case, the driver of such a rally was Donald Trump's statement where he is confident that Russia and Saudi Arabia will reduce oil production by 10 million barrels, and possibly more.

Since this is almost half of the total production by these countries, the likelihood of such a scenario is slim. Accordingly, I assume that we are talking not only about Russia and Saudi Arabia, but about the whole OPEC cartel and its allies, which produce more than 40 million barrels per day. Given the current oversupply of oil, which is already estimated at 35%, I believe that OPEC+ will find a compromise to support the oil market and its own economies.
Moving to the American trading session, I will draw your attention to the upcoming publication of the latest labor market statistics. Given the disastrous figures on the initial applications for unemployment benefits, there is a risk the latest figures will be below analysts’ expectations and I expect weakness in the USD.

We will conclude this issue with an overview of the EUR/USD currency pair.
After a false breakdown of resistance at 1.0950, it was decided to open a short position when retesting this level. A Stop Loss was set at the previous maximum, and A Take Profit at 1.0850. As we can see now, the pair collapsed under the psychological level of 1.0800, which allowed the trader to earn $1000 with minimal risk.

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

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Saudi Arabia calls for OPEC emergency meeting

Saudi Arabia called for an urgent meeting of OPEC+ member countries, Saudi Press Agency reported April 2.
The purpose of the meeting is to conclude an agreement between OPEC+ countries that will restore the "desired balance" in the oil market.
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This news is contrasting with the background of the previous position of Saudi Arabia - rejection of anyone’s position in general, conversation from a position of strength, etc.

Moreover, OPEC will invite the Texas oil regulator to participate in the OPEC+ meeting, which will take place on April 6 via teleconference.
- “We invite the United States as the main producer of oil in the world” (c)
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[fibogroup.com]

Economic calendar for the week

Trends of the current week are undoubtedly oil events:

- OPEC + is mobilizing: the OPEC + meeting should be held on April 9. However, there are some disagreements that may delay this meeting for at least 1 day.
According to Bloomberg, oil diplomats are trying their best to convene a meeting of G20 energy ministers on April 10 to attract the United States to an agreement on oil.
The transfer of negotiations on the oil market from the OPEC+ format to the G20 will not only be a political victory for Russia, and indeed Saudi Arabia (the degree of independence of the kingdom from the United States will increase). This will be a practical step towards multipolarity.

- #coronavirus
A sharp decrease in the number of cases:
After a sharp take-off the day before (more than 100K new cases per day), today there is an equally sharp decrease in this indicator (about 70K), in almost all countries. Total: 1,278,993 / 69,723
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Weekly Calendar:

04/06/2020, Monday
The new wave of QE from the US Federal Reserve for the Central Bank of the world (launch of a temporary repo mechanism for foreign central banks).
UK Construction #PMI.

04/07/2020, Tuesday
RBA Interest Rate Decision.
EU Coronavirus Emergency Ministerial Meeting.
Canada Ivey #PMI.

04/08/2020, Wednesday
US Crude Oil Reserves;
US Federal Open Market Committee (FOMC) Meeting Minutes.

04/09/2020, Thursday
OPEC meeting + (+ USA).
ECB Publishes Account of Monetary Policy Meeting;
#PPI US Producer Price Index.

04/10/2020, Friday
Good Friday: day off in the UK, France, Germany and other countries, US markets are closed.
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[fibogroup.com]

Market Watch

OPEC+ deal

Today, the oil market has opened with a fairly strong bearish gap, but by the opening of the European trading session, the situation has changed significantly.

Recall that on Thursday, Donald Trump announced that Saudi Arabia and Russia could reduce oil production by as much as 10 million barrels. There was also information about the OPEC+ meeting to discuss the introduction of quotas for oil production. All this provided additional support for oil, which last week pushed the price of WTI American crude oil above $30.0 per barrel.

All information coming out from Russia regarding the “oil deal” indicates a high probability of reaching an agreement. Nevertheless, the activity of buyers remains moderate near the $30 a barrel mark. Therefore, only further action from the United States and Saudi Arabia can return buyers to the market.

I’ll draw your attention to the USD/CAD currency pair, which has fallen by 180 points. At the same time, demand around the support level of 1.4100 remains strong, which limits the selling pressure. I’ll also draw your attention to the fact that on the way to 1.3990 there is a support level of 1.4060, which should provide additional support. Given all this, only another strong rise in oil prices can lead to a collapse of the pair to 1.3990.

Moving to the American session, the economic calendar is looking pretty empty. At the same time, trading activity should remain active amid clear uncertainty regarding short-term prospects, due to the spread of the COVID-19 virus.

Given the difficult economic situation in the eurozone and especially in Italy and Spain, compared with the United States, I expect a prolonged weakening of the EUR and, as a consequence, the EUR/USD currency pair. The immediate target for sellers is the 1.0770 mark, while there is a risk of a pair falling to 1.0720 and further to 1.0650. This scenario remains a priority until the quote returns above 1.0890.

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

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[fibogroup.com]

Oil is cheaper than water: what happens if the new OPEC+ deal fails?

The risks of a possible disruption of the OPEC+ meeting, scheduled for April 9, remain high. Last weekend, Russia and Saudi Arabia exchanged "taunts" at each other about the collapse of the oil market, and the United States, which actively joined in the discussion of the current situation, did not put forward any concrete proposals.

At the end of last week, oil prices showed significant growth during two consecutive trading sessions on reports that the alliance will discuss the possibility of reducing oil production by 10 million barrels per day in total. On Monday, April 6, prices started to decline after information on the postponement of the OPEC+ meeting from April 6 to April 9.

The OPEC + meeting on Monday lost its meaning, as the United States so far does not want to participate in the deal. Last weekend, Russia and Saudi Arabia exchanged accusations against each other over the collapse of the oil market. However, the problem is not in the positions of traditional manufacturers, but in the intentions of the United States, the expert believes. At the end of last week, Trump spoke about the readiness of Russia and Saudi Arabia to reduce production by 10 million barrels, but Washington, for its part, has not put forward any proposals.

It is still very early to take the decline in production for granted, the probability of failure of the negotiations is still quite high. If the United States is not ready to participate in the deal, the market will follow the path of a longer period of low prices that shale companies will ruin. By the way, this process has already begun ...
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[fibogroup.com]

️ RBA rate: Bank of Australia maintains interest rate at 0.25% ️

At its April afternoon meeting, the RBA voted to keep interest rates unchanged, a few weeks after they were cut from 0.5% to 0.25% during an unscheduled meeting in mid-March, as a result of the escalation of the coronavirus crisis.
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#AUDUSD responded with a powerful wave of growth in the national currency. However, one should not take the decision to keep the rate unchanged positively, as the main drivers of the foreign exchange market are now in a slightly different plane:

Yesterday, we saw a most powerful rise in stock: the S&P500 index added 7%. Positive sentiments persist today in Asia. Oil prices on the eve of the expected OPEC+ meeting on Thursday are held at high levels. Bloomberg reports that the United States will not participate in this meeting.

Analysts at #FiboGroup believe that the bottom phase has passed and a full reversal is brewing, in all types of markets. The return of the economy to normal will not have a “V” shaped character and will be stretched and smoother - due to global quarantine, recovery will be constrained by negative macro statistics, which for another 2-3 months will reflect the consequences of massive stops in state economies, “U” - figurative character.
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Global oil powers close in on historic deal to curb output

The largest oil producing countries in the world are working out conditions for an unprecedented deal to mitigate the destructive effects of the crisis caused by the coronavirus, in preparation for an emergency meeting this week.

The OPEC Secretariat invited a number of countries that were not previously members to the online meeting on the oil market (in total 36 participating countries).
At the same time, the USA and Canada were not included in the list of invitees.
For the deal to be successful , some form of cooperation with the United States is still required.

The expanded format is pleasing, but it lacks the United States and Canada. Of course, one would think that the participation of the USA and Canada does not make sense, because they are members of the G20, whose meeting will be held the day after OPEC+. But Argentina and Brazil, who were invited to the OPEC+ meeting, are also members of the G20.

Thereby now everything just confirms the version of US tactics aimed at postponing the final decision, and the possible "undermining" of the deal.
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[fibogroup.com]

Market Watch

It's time to quarantine

Since the end of last week, we hear more and more often that the economic consequences of the quarantine are extremely high and are largely underestimated. For example, Australia is already beginning to consider the possibility of partial easing of restrictions in connection with the epidemic. A number of other countries, including the United States, are also discussing such scenarios with the possibility of the partial reduction of restrictions for certain types of businesses.

Of course, the reduction of restrictions, which will lead to an increase in business activity, is a positive. Even though there is a possibility of the coronavirus spreading further, we are already witnessing another wave of interest in trading activity in the foreign exchange market.

Let's go back to Australia and AUD, which has strengthened quite a lot across the entire spectrum of the market. Thus, the AUD/USD currency pair has strengthened by 220 points since the beginning of this week, reaching a strong technical resistance level of 0.6200. Therefore, the emergence of information about the willingness to reduce restrictions, for example, the USA, should give a boost to the USD, along with any other large economies and their currencies.

Now, let's move on to the oil market and once again we hear Donald Trump, who hints that the United States is unlikely to join the OPEC+ deal. As a result, the price of WTI oil fell to $23 per barrel. Let me remind you that currently, the main driver of growth for the oil market remains the expectation that OPEC+ will agree to reduce production by 10 million barrels. Trump's comment reduces the likelihood of a cartel compromise at a meeting scheduled for Thursday, April 9th.

As a result, following the movement in the price of oil after Trump’s comments, we observed a weakening of the CAD. While the oil price was rising we saw a weakening of the USD/CAD currency pair and we can count on a bigger decline in the quotes of this currency pair if there is a further increase in oil prices. This is only possible if an OPEC+ agreement is reached.

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