[Market Review].
Silver surged above $30 at one point. Silver rose for the third straight session, breaking the $30 barrier at one point during the session, jumping 11.52% to a nearly eight-year high. Much of the reason for silver’s surge is that retail investors are shifting their focus from GameStop and other stocks to silver. Silver has gained nearly 20% since last Thursday’s lows. Silver is moving in extremes, in response to which the CFTC has said it will closely monitor silver market activity, and the CME has raised margins on a variety of precious metals futures.
Gold is range-bound. Driven by the big rise in silver prices, gold also broke the $1870 mark upwards for a while. However, Biden‘s stimulus plan was blocked and the rising demand for dollar cash from the Epidemic were not conducive to higher gold prices, so gold remained in a range-bound oscillation.
The U.S. dollar index oscillated upward. It is reported that House Speaker Pelosi, Senate Majority Leader Schumer, has submitted a joint budget resolution to promote the economic stimulus plan. The resolution will be used to pass a $1.9 trillion stimulus package. However, House Republicans opposed it and proposed a $618 billion bailout plan. The U.S. economic stimulus plan has not taken off significantly for the Time being, and the dollar index has thus gained some support. In addition, the U.S. stock market is in turmoil because of the speculative storm, trading institutions in order to advance margin fees, had to cash in more U.S. dollars; at the same time, the stock market downturn, also led to the safe-haven dollar buying demand. In addition to this, the US PMI data released during the day remained strong, which also supported the dollar. Then there is the evidence that the US is recovering from the pandemic faster compared to other countries, which also pushed the dollar stronger.
The euro plunged more than 60 points. While the dollar strengthened, non-U.S. currencies were under pressure. The euro fell more than 60 points against the dollar during the day. Data showed that German retail sales in December broke the record by 9.6% compared to the previous month, the largest month-on-month decline since the record in 1994. Germany‘s poor economic data performance, coupled with a stronger dollar, making the euro against the dollar under pressure to the downside during the day.
The British pound was under pressure to the downside. Likewise, the British pound was weaker. The pound fell more than 40 points against the dollar during the day and is now trading around 1.3680. Next we can pay attention to the British interest rate resolution published on Thursday. This is the heavyweight event that will affect the pound’s movement this week.
The yen is under sharp pressure. The Japanese yen. The dollar strengthened, driving the USDJPY higher. The currency pair oscillated upward during the day and once broke the 105 mark.
U.S. oil rose more than 3%. Finally, take a look at the oil market. U.S. oil surged more than 3%, refreshing its high since Jan. 20 to $54.12 a barrel. Oil prices were boosted by a drop in U.S. crude inventories and a rise in fuel demand as snowstorms battered the northeastern United States. In addition, Saudi Aramco said the outbreak has passed its worst and oil demand will return to pre-outbreak levels later this year. This also provided support for oil prices.
[Risk Warning].
British pound: if the Bank of England does not cut interest rates, the pound and the United States is expected to look up to 1.4
Mitsubishi UFJ foreign exchange analysts said the bank’s bullish pound’s main obstacle is this week’s Bank of England interest rate resolution. In general, the bank expects the Bank of England will not cut interest rates and will not send a stronger signal on the possibility of implementing negative interest rates in the near future. If this forecast is correct, it will open the door for further upside and push the pound higher to 1.4.
Japanese Yen: limited upside in the U.S. Japanese focus on strong resistance 105
UOB analysts pointed out that the dollar against the yen subsequent upside space is limited, 105 resistance remains strong. This can be seen in this Monday’s USDJPY high open and low trend. On the one hand, the dollar index upside space due to the decline in U.S. bond yields and again limited; on the other hand; in the context of global risk sentiment has picked up, the dollar’s safe-haven buying demand also began to be curbed again.
Silver: Institutions bullish silver target of $31.71
Silver once broke the $30 mark upwards, touching an eight-year high. Analysts at Commerzbank expect silver to reach $31.71. In the long term, the price could be set at $35.47, the high since October 2012. An intra-day retracement would be able to hold the 27.35-27.75 range.
[Key Outlook].
11:30 Australian Fed hardly makes a big move
First, take a look at the Australian Fed’s upcoming interest rate resolution. Last December, the Australian Fed kept the benchmark interest rate unchanged at 0.1% and kept 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. One of the A$100 billion quantitative easing programs will be completed in early May, with the term financing facility set to expire on June 30.
By the end of this month, Westpac expects that the Australian Fed will extend the A$100 billion quantitative easing measures, keeping the yield curve control unchanged and possibly adjusting the term financing facility instrument. In addition, the market is reassessing the policy outlook because the labor market has improved faster than expected recently.
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 -5.4%. 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.
Pending OPEC production increase falls short of planned amount
Moving on to the OPEC+ developments. OPEC raised its Crude Oil production last month as planned, but the output increase weakened due to supply disruptions in some member countries. A survey showed OPEC raised oil production by 190,000 barrels per day in January this year, an increase of just two-thirds of what was planned. Production increases in Saudi Arabia, Iraq and Iran were offset by supply disruptions in Nigeria and Libya. The survey showed that OPEC’s 13 members produced an average of 25.67 million barrels per day in January.
The data will be reviewed today by OPEC’s Joint Technical Committee and presented to the Oversight Committee tomorrow. Some delegates expect that this regular meeting will not modify the OPEC+ production cut policy; a decision on the next action will not be made until the March meeting.
If that is the case, oil prices are unlikely to fluctuate significantly. It is important to note that OPEC+’s outlook for the economy is at risk of pressure on oil prices if it believes that vaccinations will accelerate the recovery and thus the pace of production increases.
Wednesday 05:30 API crude oil inventories may increase
Next, come to focus on API crude oil inventories. Last week, API reported that US crude oil inventories decreased by 5.272 million barrels. The subsequent release of EIA crude inventories was an even bigger drop of 9.91 million barrels.
By the end of the week, the market expects that the US API crude oil inventory may increase by 1.633 million barrels for the week ending January 29. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
Currently, we need to watch out for a gradual decrease in the number of new diagnoses in the U.S. due to the successive vaccinations, and crude oil demand may be elevated, which will be positive for oil prices.
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