[Market Review].
The US Dollar Index oscillated higher. The U.S. vaccination lead and the possibility of a new round of fiscal stimulus being passed quickly in the U.S. through the budget reconciliation process boosted market confidence in the U.S. economy, and the U.S. Dollar Index shocked higher during the day, hitting a high of 91.29.
Silver retreated sharply. Next, let’s focus on silver. Silver closed down more than 8% for the day, giving back all of Monday’s gains. The stronger dollar overnight put some pressure on silver’s movement; in addition, the speculative wave showed signs of fading and U.S. stocks closed higher across the board yesterday, which also weakened silver’s appeal. Come this morning, silver prices have rebounded but are generally on the weaker side.
Gold plunged $30. The above factors also weighed on gold. Gold prices slid from $1870 all the way down to around $1840, plunging $30 during the day.
The euro was under slight pressure. On the non-U.S. currencies. The stronger dollar weighed on the euro. In addition, the EU released preliminary estimates showing that while the eurozone economy shrank less than expected in the fourth quarter of 2020, it may shrink more in the first quarter of this year. This also dragged down the euro. The euro oscillated downward against the dollar during the day. However, the euro ended the day with a narrower decline. There are reports that the Italian president may ask former European Central Bank President Mario Draghi to form a government.
The British pound fell and then rose. Another look at the British pound. Earlier, the pound fell to 1.3611 against the dollar against the backdrop of a stronger greenback. however, with the dollar’s rally slowing down a bit, coupled with a positive boost from the leading pace of vaccinations in the UK, the pair then recovered most of its lost ground. However, we need to be alert to the emergence of new mutations in the mutant new coronavirus reported in the UK. Researchers are already studying what impact these emerging mutations will have on the existing neo-crown vaccine. We can keep an eye on it subsequently.
U.S. oil broke above $55 at one point. Finally, a look at the oil market. U.S. oil rose a strong 3% intraday to touch a high of $55.23 a barrel, a new high since January 24 of last year. Progress on the new crown vaccine and production cuts by oil-producing countries brought expectations of a tightening market, with OPEC and its allies expected to finish digesting excess supply by mid-year. Meanwhile, the physical market continues to show signs of strength. Royal Dutch Shell is buying large volumes of Crude Oil cargoes. Yesterday, the oil giant’s buying volume was the highest for a single company since at least 2008.
[Risk Warning
Gold: Gold downside risk increases, fearing a dip to $1830
Analysts at the financial website Fxstreet pointed out that against the backdrop of high market popularity, the sudden pickup in dollar demand has put gold under more downside pressure. Gold came under sharp pressure during the day, falling from $1870 to near $1840. This further reinforced the pessimistic outlook. The next gold price is likely to test $1830 and then $1800 downwards.
Crude oil: Oil inventories to decrease, oil prices expected to be supported
Analysts at the financial website Forexlive pointed out that U.S. oil once exceeded 55 U.S. per barrel for the first Time since January 2020. OPEC lowered its oil demand growth forecast for this year from 5.9 million barrels per day to 5.6 million barrels per day. However, the market is more concerned about inventories. OECD inventories are forecast to be 100 million barrels above the five-year average by the end of March, but below the five-year average by the end of June. Stocks will decrease monthly this year, with the base scenario predicting a total reduction of 406 million barrels. This will support oil prices.
New Zealand dollar: institutions are bullish on the New Zealand dollar to touch 0.75 in April
Westpac economists said that the New Zealand dollar is currently trading sideways against the U.S. dollar at the mid-to-high 0.71 level. A follow-through above 0.7250 would signal a further climb. In the medium term, the bank is bullish on NZDUSD, predicting the pair will reach 0.75 in April. The boosting factors behind this are the weakness of the US dollar and the excellent growth performance of the New Zealand economy.
[Key Outlook
18:00 Eurozone January CPI is expected to remain weak
This afternoon, the eurozone will release CPI data. Since August last year, the eurozone CPI monthly rate is more volatile, in December last year, recorded 0.3%, CPI annual rate recorded -0.3%. This indicates that the core Inflation rate in the eurozone, will remain at the lowest level in history at the end of 2020.
Currently, the market is expected to January CPI monthly rate of -0.1% in the euro area, if the published value is greater than expected, or good for the euro; conversely, will be negative for the euro.
Also released is the annual CPI rate, the current market is expected to record 0.5%, if this group of data as a whole is not as expected, the euro may suffer from the pressure.
21:15 ADP employment numbers fear weak performance
In December, the data fell by 123,000. 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 decline in employment was in the service sector.
Some analysts predict that the U.S. ADP employment number in January or recorded 45,000. 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 to extend its weakness.
23:30 EIA crude oil inventories may decline
Finally, coming to the EIA crude oil inventories, the data released last week decreased by 9.91 million barrels, much less than expected. Some energy analysts say that the sharp drop of almost 10 million barrels in crude oil inventories could spark optimism in the short term and possibly push WTI prices higher, but a bigger than expected drop in refinery utilization is a red flag.
This morning, API crude oil inventories have been released, down 4.261 million barrels. Based on past experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventories may also decline.
Even so it is still necessary to pay attention to the current market expectation that the US EIA crude oil inventory for the week to January 29 may increase by 367,000 barrels. If the published data exceeds the expectation, oil prices may dip in the short term; if the inventory data is less than expected, oil prices are expected to strengthen.
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