[Market Review].
Silver jumped 6% at the open. Last week, silver was “named” by U.S. retail investors on the forum, suddenly jumped 6%, standing on the high of $26. By this morning, the surge continued to ferment, silver opened again jumped 6%, once approaching $29. However, some commodity analysts believe that silver may see short-term gains driven by retail investors, but that the big players will start to fight back later this week. In fact, aside from speculative factors, silver’s fundamentals were supposed to be bright. In recent months, some of the big investment banks have been optimistic about silver. Goldman Sachs raised its silver price target to $30 an ounce in a Jan. 27 report.
Gold is on a shaky trend. Next, let’s focus on gold. On Friday, gold moved higher again, topping out at $1875, but turned lower at the U.S. close, retreating more than $30 from the daily high, forcing $1840 down and eventually closing slightly lower on the weekly. Some analysts say that if the frenzied behavior of the short-selling war continues into this week, then gold prices may get a chance to rise to $1,900. However, the head of commodity strategy at Saxo Bank said the key to gold prices in the short term is whether they can break through resistance around $1,890. He also pointed out that Biden‘s stimulus plan may eventually be scaled back in order to get it through Congress, which could put pressure on gold.
The dollar index is shaking at a high level. From what has been revealed by all parties here, the differences between the Democrats and Republicans on the composition and size of the Epidemic relief plan remain wide. It is reported that 10 moderate Republican senators urged Biden on Sunday to significantly reduce the size of the program in order to win bipartisan support. This week, the U.S. House and Senate will act on Biden’s fiscal stimulus plan, and Democrats will try to bypass Republican approval of Biden’s economic stimulus bill. Investors can pay close attention to the relevant news. This will also have some impact on the dollar index. The U.S. dollar index maintained a high level of oscillation last week, although the Fed again showed signs of doves, and the U.S. GDP hit a new low since 1946, resulting in the U.S. index failed to test the previous upper resistance of 90.91 again, but finally the U.S. index remained firm to maintain above 90.37.
Euro momentum is weak. Next, let’s look at non-U.S. currencies. Last week, the euro remained generally weak in momentum. The ECB’s discussion on interest rate cuts did not have any substantial impact on the euro’s movement, and the euro’s fluctuations were more like a response to the dollar index.
The British pound was narrowly oscillating. Let’s look at the British pound again. The pound traded around 1.3730-1.3740 last week. December jobless claims were only 7,000, much less than expected, which had a boost to the pound. However, the current challenges facing the British economy seem to be not small. On the one hand, the post-Brexit British financial services industry, etc. are affected by the economic transactions with the EU; on the other hand; the new crown mutant strain may further extend and strengthen the blockade measures. Moody’s said that in the long run, the size of the British economy will be significantly reduced. This may put some pressure on the continued rise of the pound in the future.
U.S. oil is shaking sideways. Finally, a look at the oil market. U.S. oil oscillated sideways last week around the $52 level. A big drop of nearly 10 million barrels in EIA crude inventories supported oil prices. However, demand concerns, triggered by the embargo measures, are still weighing on oil prices.
[Risk Warning
Euro: The euro’s recent rally is blocked and a fall below 1.2050 will accelerate the downside
The rising trend of the euro against the dollar is blocked by the vaccine promotion issue and the blockade measures of EU countries. In addition, the European Central Bank officials continue to verbally intervene in the euro. However, it remains to be seen whether the verbal intervention will have an effect. Currently, the downside risk for EURUSD is elevated, with support below at 1.2050, which will accelerate to the downside if it falls below that position.
Sterling: Vaccination lead pushes up the pound Focus on support at 1.36
The pound’s losses against the dollar were further extended on Friday evening. However, some analysts expect that the faster pace of vaccination in the UK than other countries will continue to push up the pound. As long as the pound holds the support level of 1.36, it will oscillate in the 1.36-1.38 range in the short term. If it breaks above 1.38, it will continue to move up.
JPY: USD risk bias to the upside US-Japan short-term fear of rising to 104.75
Even though vaccinations are increasing, fears of a global recession are still causing investors to flock to dollar cash, driving the dollar to the upside against the yen. The currency pair has recorded three consecutive days of gains. UOB foreign exchange strategists said that as long as the dollar holds steady, the dollar is likely to rise to 104.75 against the yen in the coming weeks.
[Key Forecast].
Tuesday 11:30 Australian Fed is hardly a big move
First, take a look at the Australian Fed’s upcoming interest rate resolution. Last December, the Australian Fed left its benchmark interest rate unchanged at 0.1%, leaving the 3-year Treasury yield target unchanged at 0.1%, in line with market expectations. The Australian Fed again reiterated that it will not raise the cash rate for at least three years and will not raise rates before real Inflation reaches its target, but is prepared to take more action if necessary. In addition, the Australian Federal Reserve will continue to review the size of its bond-buying program.
By the end of the month, Westpac expects the Australian Fed to extend its A$100 billion quantitative easing measures, keeping the yield curve under control and possibly adjusting the Term Funding Facility. In addition, the market is reassessing the policy outlook because the labor market has improved faster than expected recently.
Tuesday 18:00 Eurozone GDP fears continued contraction
Next to focus on, the eurozone GDP data for the fourth quarter of last year. In the first three quarters of last year, Europe’s GDP continued to shrink, with the third quarter recorded -4.3%. A financial website commented that the outlook for the fourth quarter in the eurozone looks grim amid tighter restrictions on the epidemic. If the restrictions are extended, economic confidence may be more difficult to recover.
Currently, the market expects the preliminary value of the eurozone’s fourth quarter GDP at an annual rate of -6.1%. If the published value is better than expected, it may be positive for the euro; conversely, it will be negative for the euro.
At the same Time, the eurozone will publish the preliminary quarterly GDP, investors should consider the impact of these data on the euro.
Wednesday 21:15 ADP employment numbers fear weak performance
On Wednesday, the U.S. will release the ADP employment figures for January, which fell by 123,000 in December. The financial blog Zero Hedge commented that the December ADP report showed that employment at both large and small businesses was declining, while employment at medium-sized businesses recorded an increase. The largest drop in employment was in the service sector.
Some analysts predict that the U.S. ADP employment number in January or recorded 50,000 people. If the data is less than expected, the dollar index may be under pressure to the downside; if better than expected, then the dollar index may strengthen.
It can be seen that the market is still not optimistic about the U.S. labor market expectations, if the data is much less than expected. The dollar index is afraid of extending the weakness.
Thursday 20:00 Bank of England is likely to stay put
On Thursday, the Bank of England will announce the interest rate resolution, the Bank of England Governor Bailey previously said that the re-emergence of the new crown epidemic has put the British economy in a very difficult period, which may slow down the economic recovery. He said the Bank of England should consider negative interest rates as one of the options in its toolbox, but did not discuss negative interest rates.
TD Securities predicts that the Bank of England is unlikely to introduce negative interest rates in the current economic cycle. This is consistent with the general expectations of the market, in addition to the Bank of England is unlikely to adjust the scale of bond purchases. But need to pay attention to Bailey’s statement on the epidemic and negative interest rates, if his comments increase market expectations of negative interest rates, the pound may come under pressure.
Friday 21:30 U.S. non-farm payrolls data is hardly a bright performance
Finally, pay attention to the U.S. will be released in January non-farm payrolls data. CNBC commented that in December last year, new jobs fell by nearly 500,000 in the month as restrictions brought about by a surge in new cases of coronary pneumonia hit virus-sensitive industries, especially bars and restaurants.
Currently, the market expects that U.S. non-farm payrolls may increase by 85,000 in January, with an unemployment rate of 6.7%.
In January, the U.S. epidemic did not improve, which has put more pressure on the labor market, and this group of data may perform decadently. The dollar index may also be under pressure.
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