[Market Review].
The U.S. dollar index continued to move higher. By the expected introduction of more stimulus measures, long-term U.S. Treasury yields continue to rise, the current ten-year Treasury yield has surpassed 1.15%, and the dollar index continues to move higher.
Gold prices declined slightly. The dollar index continues to strengthen and U.S. bond yields continue to rise, seriously depressing the trend of non-interest-bearing assets gold. Gold slipped slightly during the day. However, Goldman Sachs and other institutions expect that the recent gold price retreat belongs to the short term retracement. In the medium term, the Fed is expected to continue the easing action, will play a bottoming support role for gold prices.
Silver closed down 1.38%. Silver’s trend is roughly the same as gold’s, with narrow oscillations in the $24-25 range during the day, eventually closing down 1.38%.
The euro continued to weaken. In non-U.S. currencies, the euro fell more than 50 points against the dollar during the day, influenced by a stronger dollar. Professional traders pointed out that unless the Fed officials this week to release the wording of further easing, thus again suppressing the dollar, the short term adjustment market of the euro against the dollar will continue.
The British pound oscillated to the downside. Like the euro, the pound is also shaking to the downside during the day. Although financial assistance has weakened the need for a rapid rate cut, but the United Kingdom is still one of the countries hit hardest by the epidemic, coupled with the negative impact of Brexit, the market now expects that the Bank of England will be forced to adopt negative interest rates, the earliest implementation in May this year. In this way, the pound will continue to be dragged down.
U.S. oil began to fall back. Finally, take a look at the oil market. Crude oil has had a strong start to the year, driven by Saudi Arabia’s unexpected announcement of voluntary production cuts and other news. However, as U.S. stocks retreated from record highs and the dollar rallied, reducing the attractiveness of dollar-denominated commodities, oil price gains stalled and U.S. oil fell slightly during the day, though it still stood firm at the $52 mark.
▼Bond Market
Overnight, the yield on China’s 10-year Treasury note rose 1.91 percent, while the yield on the U.S. 10-year Treasury note rose 3.3 percent and the yield on the U.S. 3-month Treasury note rose 2.38 percent.
▼In the stock market
U.S. stocks closed in tandem, with the S&P 500 down 0.66 percent, the Nasdaq down 1.25 percent and the Dow Jones down 0.29 percent; by this morning, Chinese stocks opened in the green, with the Shanghai Composite Index down 0.38 percent, the Growth Enterprise Market Index down 0.42 percent and Hong Kong’s Hang Seng Index down 0.05 percent.
[Risk Warning
Dollar: The dollar is severely oversold and expected to continue to rally
The pace of the dollar rally is accelerating, with signs that speculators are busy covering their short positions after U.S. Treasury yields spiked. Traders reported strong demand for the dollar from leveraged funds on Monday. And CFTC data showed that they cut long positions in major currencies such as the euro and the British pound. Another professional trader said the dollar was extremely oversold and that it was very ripe for a rebound that would last at least a few weeks, and possibly months.
Australian dollar: the Australian dollar may be trapped in a consolidation range, the lower support 0.7640
UOB believes that AUDUSD has fallen into a consolidation range of 0.7640-0.7805. Although the risk is to the downside, it is unlikely to test the important support level of 0.7640. On the upside, resistance is at 0.7745 and then at 0.7780.
Crude Oil: Crude Oil fears short-term surge, risk of pullback heated up
Crude oil has had a strong start to the year, with Saudi Arabia unexpectedly announcing a voluntary production cut of 1 million barrels per day last week and also raising its crude oil selling price to Asia. However, ABN AMRO believes that although the Saudi Arabia’s commitment to cut production has supported oil prices, they are unlikely to rise further in the near term and the risk of a pullback is quite high. In addition, technical indicators also show that both WTI and Brent crude oil futures are in overbought areas, signaling that a pullback is imminent.
[Key Preview].
22:30 Bostik’s stance may become more optimistic
First of all, let’s focus on Bostic’s upcoming speech. In the early hours of this morning he said that the benchmark is expected to be a strong economic recovery, open to a gradual reduction in the size of bond purchases at the end of 2021, and is expected to be clearer about the need for more aid measures by March. But there is still a long way to go from an employment perspective, still need to provide assistance to multiple sectors of the economy, long-term prices, interest rates are likely to be lower than before. Overall, Bostick’s stance tends to be optimistic that the economy will recover strongly.
Wednesday 05:30 API crude oil inventories expected to decrease
Next, come to focus on API crude oil inventories. Last week, API reported that US crude oil inventories decreased by 1.663 million barrels. Then the EIA crude oil inventories were released with an even bigger drop of 8.01 million barrels.
By the end of the week, the market is expecting a 2.72 million barrel decrease in U.S. API crude oil inventories for the week ending January 8. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
Current fundamentals need to be watched as tougher blockade measures implemented around the world because of the epidemic will limit the demand for crude oil. But U.S. President-elect Joe Biden plans to launch a trillion-dollar economic stimulus package early in his administration, which will support oil prices.
Also of interest today are the following data.
19:00 U.S. NFIB Small Business Confidence Index for December: 101.4 previous, 100.3 forecast.
21:55 U.S. Redbook annual rate of commercial retail sales for the week to Jan. 9: 5.5% previous.
22:35 Fed Governor Brainard speaks.
Wednesday 01:00 EIA releases its monthly short-term energy outlook report.
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